Life Healthcare's Brenthurst Clinic in Parktown, Johannesburg. The company expects earnings to end March to decline.Photo: Supplied
Durban - Private hospital group Life Healthcare has warned its shareholders that it expected earnings for the six months to end March to decline between 70 and 75 percent, mainly due to an acquisition of the Alliance Medical Group during the period.

The company said it also expected the transaction to impact on its profits, with headline earnings per share (Heps) anticipated to be between 23.3 cents and 27.9c for the period compared to 93c recorded during the similar period last year.

“Earnings per share and Heps are below the comparative period last year, primarily due to the impact of the acquisition of Alliance Medical and one-off items related to the investment in Poland,” the group said yesterday.

Last month, Life Healthcare announced that it had raised R9 billion through its rights offer for the 95 percent acquisition of the UK-based group. It said the purchase would give it access to the UK, Italy and Ireland.

Life Healthcare already has operations in Poland and India.

The group said the costs relating to the Alliance Medical acquisition were estimated to be between R240 million and R260 million; with interest costs related to the acquisition funding estimated to be between R370 million and R390 million for the period.

“Debt funding of approximately R9 billion has been repaid in April 2017 from the equity raised,” the group said.

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An equity analyst at Mergence Investment Managers, Izak van Niekerk, said Life Healthcare made a good decision by opting for a rights offer “as their net debt position would be above their targeted levels if they bought Alliance only with debt funding”.

In southern Africa the group said it also expected its normalised earnings before interest, tax, depreciation and amortisation (Ebitda) to be below the 2016 figures.

Normalised Ebitda for the southern African operations were forecast to come down between 1.5 percent to 2.5 percent lower than 2016 due to the lower trading and the impact of the loss of the Gauteng Mental Health contract in the healthcare services division in July 2016.

The group said the normalised Ebitda was the primary measure it used to assess underlying financial performance.

The group said Alliance Medical had performed to Life Healthcare’s expectations. The company expects to release its half-year results on or about May 12.

Life Healthcare shares dropped 0.31 percent on the JSE  to close at R28.70.