LIFE HEALTHCARE Group Holdings’ share price fell 6.8% after it forecast a 75% to 95% drop in earnings a share including non-trading items for the year to September 30, despite a good operational performance.
Although the 2023 financial results are expected to be released on November 16, non-trading items known to have impacted results were a R500 million impairment charge on the disposal of Alliance Metal Group (AMG), and R300 million in increased finance costs compared to 2022 due to higher interest rates.
Earlier this month the group inked a deal to sell its UK diagnostics business AMG for about R8.4 billion and proceeds would go to shareholders by way of special dividend. The share close 5.43% lower at R18.46 on the JSE yesterday.
Life Healthcare operates 63 healthcare facilities in South Africa, and one facility in Botswana. This accounted for just more than 70% of its revenue in 2022.
It said in a trading statement yesterday that its results would also show a R150m positive impact due to the settlement of a matter with SA Revenue Service on VAT, that there would be a R35m impairment in the UK, while the prior year’s results were positively impacted by the release of a Life Molecular Imaging (LMI) contingent consideration of R437m.
Consequently, normalised EPS from continuing and discontinued operations, which excludes the impact of non-trading related items, was expected to be between 13% lower to 5% higher year-on-year.
AMG would be sold to iCON Infrastructure1, and AMG had been classified as an asset held for sale.
Trading highlights during the year included 7% to 13% group revenue growth from continuing operations, and activity growth from acute and complementary services with paid patient days (PPDs) growing by 9.5%.
Group normalised earnings before interest tax depreciation and amortisation from continuing operations increased by between 1% and 6%.
“The acute and complementary services business delivered excellent results. PPD growth of 9.5% benefited from the addition of two new network deals ... and a continuation of the trend in activities to return to a more normalised mix,” directors said.
Two facilities were closed during the period and impacted the growth against the prior period.
The acute hospital business delivered PPD growth of 10.2% year-on-year. This resulted in a higher average occupancy level of 69.7% in the second half of the financial year, versus 65.5% in the first half. Average occupancy was 67.6%, up from 61.1% in 2022.
Revenue per PPD was flat against the prior financial year and versus a decline of 0.9% in the first half of 2023.
Medical PPDs (excluding Covid-19 PPDs) grew by 20.6%, while surgical PPDs grew by 10.1%. The split between medical PPDs to 50.2% versus 49.8% for surgical PPDs, was similar to 2019 levels.
The complementary services business experienced PPD growth of 4.1%, driven by a recovery in mental health PPDs of 8.4%, while acute rehabilitation PPDs declined 3.8% following closure of a facility in Bloemfontein.
The diagnostic imaging business in South Africa had strong underlying activity and revenue growth.
Revenue for southern Africa was expected to grow by 7% to 12% and normalised earnings before interest, taxation, depreciation and amortisation was expected to grow 3% to 8% in an environment that had seen inflationary pressures on salaries, the impact of load shedding on costs, mix changes and increased corporate overheads relating mainly to IT costs and headcount.
LMI's NeuraCeq’ remained the key revenue driver for LMI and continued to generate sales from the clinical trials of disease modifying drugs (DMDs) within the Alzheimer's Disease field.
The business generated 30% growth in commercial volumes and sales of NeuraCeq’ from private patients starting DMD treatment, while growth in NeuraCeq' volumes from ongoing clinical trials slowed.
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