Life Healthcare reports squeezed profit margins

By Sandile Mchunu Time of article published May 31, 2019

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DURBAN - Despite Life Healthcare reporting squeezed profit margins in the six months to end March, the private hospital operator expects its annual earnings to reflect an increase of 20percent due to the disposal of Max Healthcare by the financial year end.

The group yesterday reported that earnings per share (Eps) on a normalised basis, excluding non-trading-related items, declined by 9.4percent to 49.1cents, down from 54.2c compared to last year.

“Normalised Eps was impacted by the investments in growth initiatives and increased human resource capacity at group level to support the growth initiatives,” the group said. Normalised Eps, excluding the current losses on these initiatives was 54c - in line with last year.

Headline earnings per share (Heps) decreased by 49.9percent to 26.9c

However, the group said Eps and Heps had been hurt by the mark-to-market loss of R256million net of tax on the foreign exchange option contracts, which had been entered into due to the disposal of Max Healthcare.

These options diluted Eps and Heps by 17.6c.

Revenue for the six months was up by 9.5percent to R12.4billion, up from R11.3bn, while normalised earnings before interest, tax, depreciation and amortisation increased by 2.2percent to R2.7bn, up from R2.6bn compared to last year.

Chief executive Dr Shrey Viranna said that while tough operating conditions were expected to remain, the group was optimistic about growth prospects both in southern Africa and internationally. “In South Africa, we are broadening our business lines across the healthcare continuum. To complement our growth focus, we have initiated several efficiency programmes for sustainability which include nursing optimisation, procurement, and a focus on cost of sales and other administrative costs”, Viranna said.

The group also has set aside an amount of R2.29bn as capital expenditure for the year, with R1.1bn to be spent in improving its Southern Africa operations, with another R1.1bn in its international operations and a further R87m in Scanmed in Poland.

Viranna said the group remained confident that these growth initiatives were key to its sustainability and relevance, as the group aimed to broaden Life Healthcare’s offering by building new outpatient models, developing the diagnostic opportunity, investing in data analytics and developing clinical quality products. The board declared an interim gross cash dividend of 40c a share from income reserves.

Life Healthcare shares closed 056percent higher at R23.21 on the JSE yesterday.


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