Strong operational growth across geographies keeps Life Healthcare Group strategy on track
Life Healthcare Group has announced strong results for the six months to 31 March 2023, growing group revenue by 12.9% to R15.3 billion and operating profit by 13.5% to R2.7 billion on the back of excellent operational performance in both acute and non-acute businesses.
Group Chief Executive Peter Wharton-Hood says: “We have again shown solid operational performance across all markets, maintaining momentum, and making steady progress in executing on our long-term strategy. We remain well-positioned for sustainable growth in 2023 and beyond.”
The Life Healthcare southern African business grew revenue by 11.6% and increased normalised earnings before interest, tax, depreciation, and amortisation (EBITDA) by 13.5% year-on-year. These stellar operational results were driven by higher utilisation of the Group’s acute and complementary services. Hospital and complementary paid patient days (PPD) grew 12.5%, and this improved utilisation has resulted in improving operational leverage and an increasing normalised EBITDA margin. In line with the Group's strategy to improve underlying occupancies, it concluded network deals with the Government Employees Medical Scheme (GEMS) and Medscheme last year and is now the leading designated services provider in the country.
Southern Africa Chief Executive Officer, Adam Pyle says: “Our operations saw a good increase in underlying activities, whilst improved occupancies resulted in good revenue growth and improved margins. Increased activity came off the back of normalising operations after Covid-19, and the successful completion of our network deals. We launched our value-based, integrated care product for renal dialysis in January 2023, to provide more consistent, holistic, and cost-effective care for patients and negotiated our first renal value-based contract with one of South Africa’s leading medical schemes. These results include an additional cost of R40 million related to increased diesel usage as a result of the electricity challenges.”
The international business also delivered strong results, with growth in most regions. Revenue grew 15.5% year-on-year (in Rand), and normalised EBITDA was up by 10.8%. While inflation remains elevated in much of Europe, energy costs have started to decline, and rising interest rates are likely to see inflation moderating.
International Chief Executive Officer, Mark Chapman adds: “Our business has delivered solid growth across all the main markets within which we operate. Revenue in the UK grew by 13.2% year-on-year, driven by continued demand for PET-CT scanning and also boosted by the opening of two community diagnostic centres (CDCs). We have continued expanding our footprint of CDCs. We now have seven CDCs in operation, working in partnership with the NHS and a healthy pipeline of CDCs in the advanced negotiation phase. In Italy, revenue grew by 9.5% year-on-year and in Ireland, revenue was up 33.7%.”
Regarding the consideration of several unsolicited proposals for its international Alliance Medical Group (AMG) business, Wharton-Hood says the Life Healthcare Group Board, through its advisers, is still engaging with the parties. The non-exclusive engagement aims to assess the viability and suitability of the proposals and whether a sale of AMG could be in the interests of all stakeholders.
The Group continues to grow and diversify its non-acute portfolio across its southern African operations and has made good progress in rolling out its value-based care model, establishing imaging and renal dialysis units across the country. To this end, the Group recently announced that it has been entrusted by Fresenius Medical Care to take over 51 of its renal dialysis clinics to support patients in South Africa, Namibia and eSwatini. “We are finalising our applications for approval of the deal from the competition authorities of South Africa, as well as Namibia and eSwatini, and when the South African approval is given we will be able to offer the considerable benefits of our integrated renal care product to many more patients in South Africa,” Pyle added.
Further it has acquired the non-clinical assets of TheraMed Nuclear, a Gauteng-based nuclear-imaging business, adding PET-CT and SPECT-CT capabilities to its SA imaging business.
The Group is continuing its SA molecular imaging expansion, through a joint venture with AXIM, and is moving ahead with building two cyclotrons, which allows the Group to bring its global radiopharmacy expertise to South Africa.
Wharton-Hood concludes: “We are bullish about seeing further volume growth in the remainder of the financial year and expect to see PPD volumes grow c. 10% in southern Africa for the full year. We also anticipate scan volume growth of between 6% and 8% in our UK and European diagnostic imaging market. There has been positive progress on the development and approval of disease modification drugs to treat Alzheimer’s disease. This is good news for Alzheimer’s patients, and augurs well for our Life Molecular Imaging (LMI) business. The Group remains in a strong financial position, with net debt to EBITDA at 2.17x, compared to the 2.03x as at 31 March 2022.
The management team has done an amazing job in again delivering a strong set of results whilst dealing with a range of challenges, including macro-regulatory infrastructure uncertainty, skills shortages, and energy-supply issues. We want to thank the management team, our employees across our geographies and our doctors for this great achievement.
In closing, the Board also wishes to thank Mr Royden Vice and Dr Malefetsane Ngatane, who resigned as independent non-executive directors from the Board in January and February 2023 respectively, for their dedicated service and outstanding contribution to the Board during their tenures. We wish them both the very best during their well-deserved retirement.”
For more information on the unaudited interim results for the period ended 31 March 2023 - click here.