Life Healthcare yesterday reported a 45.1 percent decline in earnings for the year to end September, hurt by an impairment charge in Scanmed, Covid-19 outbreak and a provision for additional expected credit losses. Photo: Terry Haywood
Life Healthcare yesterday reported a 45.1 percent decline in earnings for the year to end September, hurt by an impairment charge in Scanmed, Covid-19 outbreak and a provision for additional expected credit losses. Photo: Terry Haywood

Life Healthcare takes Covid-19, Scanmed knock

By Sandile Mchunu Time of article published Nov 20, 2020

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DURBAN - Life Healthcare yesterday reported a 45.1 percent decline in earnings for the year to end September, hurt by an impairment charge in Scanmed, Covid-19 outbreak and a provision for additional expected credit losses.

As a result, its headline earnings per share (Heps) declined by 45.1 percent to 48.7 cents a share and normalised earnings before interest, tax, depreciation and amortisation (Ebitda) fell by 24.1 percent to R4.35 billion.

Its revenue was marginally down by 1.1 percent to R25.39bn, negatively impacted by the second half performance.

The group said an impairment of R793 million relating to Scanmed in Poland reduced its earnings per share (Eps) by 54.5c, resulting in a loss of 6.4c.

Life Healthcare said that it had restarted the Scanmed disposal process during September and was in the advanced stages of disposing of the business.

The group’s earnings were also hurt by a deferred tax charge on the unrecognised exchange gain on a loan with Scanmed of R133m and a provision for additional expected credit losses of R186m.

Chief executive Peter Wharton-Hood said Life Healthcare’s 2020 financial year was a tale of vastly different halves.

“The group delivered an excellent performance during the first half of the 2020 financial year, but trading was significantly impacted in the second half of the year by the Covid-19 pandemic. The initiatives developed in response to Covid-19 serve as a solid foundation for us to move forward into 2021,” Wharton-Hood said.

Life Healthcare said it believed that it had a competitive low cost infrastructure, which could deliver on superior margins, domestic growth opportunities in acute services through driving nursing excellence and optimisation, and it has a strong team to manage the challenges ahead for the next six months due to uncertainty of government lockdown precautions and a second surge.

“This ensures that we can focus on driving growth, to continue to provide not only the best quality care, but also drive shareholder value,” he said.

Wharton-Hood said their primary focus in the second half was to manage the impact of the pandemic.

“We took a number of actions following the outbreak of the pandemic to ensure that we continued providing quality care to our patients, protected the health and safety of our employees in the short term while preserving liquidity,” he said.

Life Healthcare said it had seen a good recovery in medically necessary procedures in southern Africa and the return to approximately 90 percent of pre-Covid-19 scan volumes in the majority of the territories in its international operations from the beginning of May.

Its cash generated from operations amounted to R4.6bn and the group said it was in a strong financial position with available undrawn bank facilities of R6.3bn.

“We come from a position of strength following the first surge of Covid-19 through the effective implementation of safety measures and infectious disease management processes in collaboration with our medical advisory committees. We are cautious as there is no certainty of how the second wave will play out,” Wharton-Hood said.

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