Life Healthcare earnings decline as occupancy rates soften

Private hospital operator Life Healthcare on Thursday reported a 9.5% increase in revenue for the period ended March 2019, to R12.4 billion. This consisted of a 5.8% increase in southern African revenue to R8.8 billion, and a 20% increase in international revenue to R3.6 billion.

Headline earnings per share (HEPS) decreased by 49.9% to 26.9 cents per share, and operating profit dropped 3.6% to R1.8 billion.

During the current financial period, Life Healthcare said it invested approximately R1.2 billion, up from  R1.0 billion in 2018, and comprising mainly of capital projects of R925 million and a new acquisition by Alliance Medical of R187 million. The maintenance capex for the period was R527 million, it said.

Normalised EBITDA increased by 2.2% to R2.73 billion – impacted by tough trading conditions and investments in growth initiatives. Normalised EBITDA excluding growth initiatives increased by 3.8%.

The board at Life Healthcare declared an interim dividend of 40 cents per share, up 5.3%.

“While we expect tough operating conditions to remain, we are optimistic about the group’s growth prospects both in southern Africa and internationally,” it said.

In South Africa, Life Healthcare said it will broaden its business lines across the healthcare continuum. “We are also engaging positively with government to explore ways to improve access to quality healthcare in the country, and look forward to strengthening these efforts in the coming months.”

“To complement our growth focus, we have initiated several efficiency programmes for sustainability. These include nursing optimisation, procurement, and a focus on cost of sales and other administrative costs. In addition, we are progressing on our integration effort,” it said.

Local revenue from hospitals and complementary services grew by 5.7% mainly due to a 5.9% increase in revenue per paid patient day (PPD), with a 0.3% decline in PPDs.

The increase in revenue per PPD is made up of a 5.1% tariff increase and a 0.8% positive case mix change. The lower activity volumes are due to a quiet Q1 FY2019, ongoing funder-managed care initiatives and lower admissions for respiratory diseases which commenced in H2 FY2018, the hospital group said.

The overall weighted occupancy for the period decreased slightly to 67.7% (2018: 68.3%), with 41 brownfield expansion beds being added. Complementary services continued to show good growth with revenue increasing by 7.7%.

Organic capex for the year is expected at approximately R1.1 billion. “We will continue to focus on improving clinical quality and delivering value via our operational efficiency programmes.”

The group said it will invest further into its growth initiatives – new outpatient models, radiology and Life Molecular Imaging.

Read: Here’s how many South Africans have medical aid

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Life Healthcare earnings decline as occupancy rates soften