Occupancy rates boost profit at Life Healthcare

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Londiwe Buthelezi

With more than 1 100 new bed licences pending, growth momentum in markets outside of South Africa and low gearing that provides financial flexibility to continue to invest more into its existing and new operations, Life Healthcare is advancing its position in the country’s private hospital sector.

The company, which has been increasing its hospital occupancy rates ahead of rivals in the past few years, continued to capitalise on South Africa’s growing demand for private hospital services. Reporting its results for the half year to March, the group yesterday reported 70.6 percent occupancy, the best it has had for the period since it listed in 2010.

It recorded a 10.2 percent increase in revenue to R6.2 billion. Operating profit increased by 90.1 percent to R2.49bn and normalised earnings a share rose 16 percent to 82.7 cents.

36One Asset Management analyst Jean Pierre Verster said that although the other hospital groups were yet to announce results, he expected Life Healthcare to still have the highest occupancy rate.

He said the group benefited from operational efficiencies as a result of both its structure and its geographic position.

“Netcare has high concentration in Gauteng and Mediclinic has wide representation in the Western Cape. But Life Healthcare has a presence across South Africa, which makes it a preferred hospital group when medical aids are looking for preferred service providers because they want a wide network,” he said.

Verster said he felt that Life Healthcare had increased its profit margin by more than its rivals as a result of these structural contributors.

Life Healthcare said it was planning to add an additional 120 brownfield acute hospital beds in the next six months.

In the period under review, the group added 142 acute care hospital beds. After the 120 new beds that were expected in the next six months, Life Healthcare expected another 180 or more of the outstanding 1 100 beds within a year.

As demand for private hospitals grew in South Africa, all of the country’s three biggest independent hospital groups – Life Healthcare, Netcare and Mediclinic – have been adding new beds rapidly.

Verster said the three groups had “fire power” to expand in South Africa and while Life Healthcare’s group results showed good gearing, the other two groups’ gearing was offshore.

Even if local competition is tight, Life Healthcare is increasingly looking beyond South Africa for growth. Last month it bought a 80.7 percent stake in Polish private health-care company Scanmed Multimedis for R427 million

In India, where it acquired a 26 percent stake in Max Healthcare Institute in 2011, revenues continued to grow.

Verster said it would be interesting to see if Life Healthcare was going to increase its stake closer to 50 percent now that there had been management changes that would allow the group to exert more influence in Max.

Life Healthcare declared an increase of 16.7 percent in the interim cash dividend to 63c a share.

Life Healthcare shares lost 0.4 percent to close at R41.93 on the JSE yesterday.


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