| Tue 30 Nov 2010, 13:26 | | LHC - Life Healthcare - Audited group results and cash dividend declaration for |
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LHC
LHC
LHC - Life Healthcare - Audited group results and cash dividend declaration for
the year ended 30 September 2010
Life Healthcare Group Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2003/002733/06)
ISIN: ZAE000145892
Share Code: LHC
("Life Healthcare", "the Group" or "the Company")
AUDITED GROUP RESULTS AND CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 30
SEPTEMBER 2010
Life Healthcare Group
a world class provider of quality healthcare
Revenue +10.8% to R8 786 million
Operating profit +20.1%
Earnings per share (12.5%) to 64.5 cents
Normalised earnings per share +26.1% to 92.7 cents
Cash generated from operations +18% to R2 233 million
Final dividend 29 cents per share (total 52 cents per share)
Our 4 drivers... focusing on and investing in:
GROWTH, QUALITY, EFFICIENCY AND SUSTAINABILITY
Condensed consolidated statement of comprehensive income
for the year ended 30 September 30 September
R`m 2010 2009
Revenue 8 786 10.8% 7 930
Other income 94 79
Operating expenses (7 013) (6 454)
Operating profit 1 867 20.1% 1 555
Fair value losses on (26) (64)
derivative financial
instruments
Finance income 41 54
Finance cost (342) (337)
Share of associates` net 100 101
profit after tax
Profit before tax 1 640 1 309
Tax expense (805) (372)
Profit after tax 835 (10.9%) 937
Other comprehensive income
Foreign currency (3) (1)
translation differences
Total comprehensive income 832 (11.1%) 936
for the year
Profit after tax
attributable to:
Ordinary equity holders of 664 (12.5%) 759
the parent
Non-controlling interest 171 178
835 937
Earnings per share (cents) 64.5 (12.5%) 73.7
Headline earnings per share 63.5 (14.8%) 74.5
(cents)
Diluted earnings per share 64.5 (10.4%) 72.0
(cents)
Diluted headline earnings 63.5 (12.7%) 72.7
per share (cents)
Weighted number of shares 1 029 883 1 029 747
in issue (`000)
Headline earnings per share
Profit attributable to 664 759
ordinary equity holders
Adjustments (net of tax):
Impairment of intangible - 9
assets
Profit on disposal of (9) (1)
investments in
subsidiaries, joint
ventures and associates
Profit on disposal of (1) (1)
property, plant and
equipment
Headline earnings 654 (14.6%) 766
Headline earnings per share 63.5 (14.8%) 74.5
Condensed consolidated statement of financial position
30 September 30 September
R`m 2010 2009
ASSETS
Non-current assets 6 194 5 663
Property, plant and equipment 3 258 2 905
Intangible assets 2 220 2 156
Other non-current assets 716 602
Current assets 1 678 1 223
Other current assets 1 196 1 122
Cash and cash equivalents 482 101
TOTAL ASSETS 7 872 6 886
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 2 849 2 320
Non-controlling interest 667 610
TOTAL EQUITY 3 516 2 930
LIABILITIES
Non-current liabilities 2 566 2 073
Interest bearing borrowings 2 024 1 631
Other non-current liabilities 542 442
Current liabilities 1 790 1 883
Other current liabilities 1 340 1 160
Current portion of interest bearing 450 723
borrowings
TOTAL LIABILITIES 4 356 3 956
TOTAL EQUITY AND LIABILITIES 7 872 6 886
Condensed consolidated statement of changes in equity
for the year ended Total Non-
capital and controlling Total
R`m reserves interest equity
Balance at 1 October 2009 2 320 610 2 930
Total comprehensive income 661 171 832
Profit for the year 664 171 835
Other comprehensive income (3) - (3)
Issue of shares 4 341 - 4 341
Share repurchase (4 019) - (4 019)
Share based payment reserve 75 - 75
movement
Deferred tax on realisation 20 - 20
of share based payment
Movement on transactions with (19) - (19)
non-controlling interest
Capital repayments to non- - (28) (28)
controlling interests
Dividends paid (530) (86) (616)
Balance at 30 September 2010 2 849 667 3 516
Balance at 1 October 2008 1 813 537 2 350
Total comprehensive income 758 178 936
Profit for the year 759 178 937
Other comprehensive income (1) - (1)
Share based payment reserve 52 - 52
movement
Deferred tax on share based 57 - 57
payment reserve modification
Capital repayments to non- - (39) (39)
controlling interests
Dividends paid (260) (66) (326)
Share repurchase (100) - (100)
Balance at 30 September 2009 2 320 610 2 930
Condensed consolidated statement of cash flows
for the year ended 30 September 30 September
R`m Notes 2010 2009
Cash generated from 2 233 1 895
operations
Income tax paid (396) (493)
Net cash inflow from 1 837 1 402
operating activities
Net cash outflow from (695) (466)
investing activities
Net cash outflow from (788) (1 249)
financing activities
Net (decrease)/ increase in 354 (313)
cash and cash equivalents
Cash and cash equivalents - 101 412
beginning of the year
Cash balances acquired 27 2
through business combinations
Cash and cash equivalents - 482 101
end of the year
Segmental report
During the reporting years all the segments operated in southern Africa and
therefore no geographical segments are presented.
Assets and liabilities are not reviewed on individual segment basis but rather
on a Group basis and are therefore not presented.
There are no inter-segment revenue streams.
R`m 2010 2009
Operating segments
Revenue
Southern Africa 8 786 7 930
Hospitals 8 140 7 298
Healthcare services 636 614
Corporate 10 18
Profit before items detailed below
Southern Africa 1 874 1 670
Hospitals 1 595 1 419
Healthcare services 118 92
Corporate 161 159
1 874 1 670
Amortisation of intangible assets (122) (123)
Impairment of intangible assets - (9)
Profit on disposal of businesses 10 1
Post-retirement medical aid movement 3 7
Retirement benefit asset movement 102 9
Fair value gains/(losses) on derivative (26) (64)
financial instruments
Finance income 41 54
Finance costs (342) (337)
Share of associate`s net profit after tax 100 101
Profit before tax 1 640 1 309
Acquisition and disposal of investments
Increase in ownership interest in subsidiaries as a result of non-controlling
interest transactions
The Group had marginal increases in its investment in Flohoc Investments (Pty)
Ltd, The New Kensington Clinic (Pty) Ltd, and Wilgeheuwel Hospital (Pty) Ltd.
During 2009, the Group had marginal increases in its investment in Flohoc
Investments (Pty) Ltd, The New Kensington Clinic (Pty) Ltd and Little Company of
Mary Trust, as well as indirectly buying out the remaining non-controlling
interest in Wilgers Hospital Ltd.
R`m 2010 2009
Value of investments acquired:
Value of increased ownership in subsidiary (14) (28)
Transactions with non-controlling interest (23) -
reserve
Goodwill - (15)
Cash flow on increase of investments in (37) (43)
subsidiaries under common control
Decrease of ownership interest in subsidiaries as a result of non-controlling
interest transactions
The Group disposed of marginal percentages in Little Company of Mary Trust and
Flohoc Investments (Pty) Ltd to non-controlling interests.
During 2009 the Group disposed of a marginal percentage of its investment in
Little Company of Mary Trust and Flohoc Investments (Pty) Ltd to non-controlling
interests.
The Group still maintained control over the subsidiary entities after the part
disposal of the investments.
Disposal of investments in subsidiaries, associates and joint ventures
The Group disposed of its investments in Vincent Pallotti Oncology Joint Venture
on 31 May 2010 and Joint Radiotherapy (Pty) Ltd on 30 November 2009.
Business combinations
During June 2010, the Group acquired Amabubesi Hospitals (Pty) Ltd (Bay view
Hospital) and Amabubesi Healthcare Properties (Pty) Ltd. Due to a change in the
shareholders` agreement, the Group has gained control of LCM Oncology (Pty) Ltd
and Wilgers Cathlab Trust.
R`m 2010 2009
Details of the net assets acquired and
goodwill are as follows:
Purchase consideration
Total purchase consideration 267 9
Cash portion 260 9
Non-cash portion 7 -
Non-controlling interest 3 -
Fair value of net assets acquired (97) (1)
Intangible assets (93) (3)
Goodwill 80 5
The assets and liabilities arising from the acquisition were as
follows:
Acquiree`s
carrying
Fair value amount
R`000 2010 2010
Cash and cash equivalents 27 27
Inventories 6 6
Trade and other receivables 25 25
Property, plant and equipment 118 77
Trade and other payables (26) (26)
Contingent liabilities (9) -
Current income tax liability (13) (13)
Deferred tax (31) -
Intangible assets 0 0
Fair value of the net assets 97 96
The contingent liability relates to
potential tax liabilities identified
during the due diligence process of
acquiring businesses and were not
accounted for at the acquisition date in
the records of the company. These
liabilities will in all likelihood become
contractual obligations in the short
term.
Total purchase consideration
Transactions with non-controlling 37 43
interest reserve
Business combinations 267 9
304 52
Basis of preparation and presentation of annual financial statements
These consolidated condensed financial results have been prepared in accordance
with IAS 34 "Interim Financial Reporting", in the manner required by the
Companies Act of South Africa and the JSE Listings Requirements. The financial
results have been prepared in accordance with those IFRS standards and
International Financial Reporting Interpretations Committee ("IFRIC")
interpretations issued and effective or issued and early adopted as at 30
September 2010. The consolidated condensed financial statements should be read
in conjunction with the annual financial statements for the year ended 30
September 2010 which have been prepared in accordance with International
Financial Reporting Standards (IFRS).
These accounting policies have been consistently applied to all the years
presented, unless otherwise stated.
Board of directors
During the year under review the following changes were made to the board of
directors as non-executive directors:
Resignations
RCM Laubscher resigned on 21 April 2010
NV Mokhesi resigned on 20 August 2010
EW Mbuthia resigned on 23 August 2010
AG Aitken (alternate director) resigned on 23 August 2010
Appointments
PJ Golesworthy was appointed on 10 June 2010
LM Mojela was appointed on 10 June 2010
TS Munday was appointed on 10 June 2010
Report of the independent auditor
These results have been audited by PricewaterhouseCoopers Inc. Registered
auditors. Their unqualified opinion is available for inspection at the company`s
registered office.
Commentary
Overview
Life Healthcare performed well during the period under review and is in a
healthy financial position to deliver on its strategic objectives. The high
incidence of disease together with a growing and ageing medical aid population
contributed to an increased demand for hospital services. These factors and the
increase in bed capacity resulted in hospital paid patient days increasing by
2.5%.
Initial public offer (IPO), listing on the JSE and earnings
The Group completed its IPO on 10 June 2010 with new investors taking up 387
million shares. The listing included the issuing of 321 million new shares
raising R4 341 million and simultaneously repurchasing an equal number of shares
out of share premium (R803 million) and distributable reserves (R3 216 million),
which attracted an STC charge of R322 million. The remaining 66 million shares
were sold by shareholders to the new investors. These transactions had the
following effect :
Share capital
and share Distributable
premium reserves Total
Issue of shares at 4 341 - 4 341
listing
Share repurchase (803) (3 216) (4 019)
STC arising on share - (322) (322)
repurchase
3 538 (3 538) -
The Group did not raise any cash as a result of the listing as it has sufficient
facilities and capacity to meet expected operating requirements. Total
shareholder funds were not affected by the new share issue and repurchase,
however the structure of the repurchase through distributable reserves and the
STC charge has resulted in negative retained earnings at September 2010 of R1
079 million.
The majority of the IPO costs and the STC payable of R322 million were borne by
the selling shareholders. The IPO constituted a liquidity event for the Employee
Trust and the unamortised future cost of R36 million had to be recognised in
terms of IFRS 2 with a total charge for the year of R61 million (2009: R25
million).
Financial performance
Revenue increased by 10.8% to R8 786 million (2009: R7 930 million). The
hospital division revenue increased by 11.6% as a result of higher revenue per
paid patient day and a 2.5% increase in paid patient days (PPDs). Revenue in
Healthcare Services increased by 3.6% primarily as a result of inflation linked
price increases offset by reduced volumes following the completion of two
contracts with the Eastern Cape Department of Health.
A key management measure which is a non-IFRS measure of business performance is
normalised EBITDA (earnings before interest, tax, depreciation and amortisation)
which increased by 14.8% to R2 173 million (2009: R1 893 million). Life
Healthcare defines normalised EBITDA as operating profit plus depreciation,
amortisation of intangibles, impairment of goodwill as well as excluding
profit/loss on disposal of businesses, surpluses/deficits on retirement benefits
and the accelerated employee trust charge.
30 September 30 September
R`m 2010 2009
Normalised EBITDA
Operating profit 1 867 1 555
Profit on sale of businesses (10) (1)
Depreciation on property, 263 223
plant and equipment
Impairment of intangible - 9
assets
Amortisation of intangible 122 123
assets
Employee trust accelerated 36 -
charge
Retirement benefit asset (102) (9)
movement
Post-retirement medical aid (3) (7)
movement
Normalised EBITDA 2 173 14.8% 1 893
Normalised EBITDA as % of 24.7% 23.9%
turnover
Operating profit increased by 20.1% to R1 867 million (2009: R1 555 million) due
to strong business performance, leveraging efficiencies across the Group to
contain costs, and a R105 million actuarial gain on the retirement benefits.
Salaries, especially those of skilled nursing staff, continued to increase above
the rate of inflation and accounted for a large portion of the Group`s
expenditure.
Earnings per share (EPS), headline earnings per share (HEPS) and normalised
earnings per share
Earnings per share and headline earnings per share reduced by 12.5% to 64.5
cents (2009 73.7 cents) and by 14.8% to 63.5 cents (2009 74.5 cents)
respectively. This was primarily due to the once-off STC charge of R322 million
in respect of the share repurchase. Earnings on a normalised basis increased by
26.1% to 92.7 cents (2009: 73.5 cents) and are underpinned by high cash
generation.
30 September 30 September
R`m 2010 2009
Normalised earnings
Profit attributable to 664 759
ordinary equity holders
Adjustments (net of tax):
Retirement funds (76) (12)
STC on listing 322 -
Employee trust accelerated 36 -
charge
Listing cost 17 -
Impairment of intangible - 9
assets
Profit on disposal of (9) (1)
businesses
Normalised earnings 954 26.2% 755
Normalised EPS (cents) 92.7 26.1% 73.5
Cash flow
The business generated healthy cash flows. Streamlined administrative processes
contributed to tight working capital management resulting in cash generated from
operations before interest and taxes of R2 233 million (2009 R1 895 million).
Financial position
The Group is in a strong financial position with low gearing. The debt
negotiated in 2005 was refinanced in May 2010 reducing interest costs,
increasing flexibility in respect of future funding and extending the debt term.
The Group has adequate facilities to meet expected needs with a working capital
facility of R250 million and an uncommitted revolving credit facility of R1
billion. The Group is well within the debt covenants.
Capital expenditure
During 2010, Life Healthcare invested R813 million (2009: R603 million)
comprising capital projects of R516 million (2009: R551 million) and
acquisitions R297 million (2009 R52 million). A further R600 million has been
allocated for capital projects in the 2011 financial year. This investment in
the Group`s facilities ensures that the demand for services is met and the Group
remains abreast of modern technology and standards.
Growth
During the year, the Life Beacon Bay Hospital in East London and the Life
Orthopaedic Hospital in Cape Town were commissioned, and the Life Bay View
Private Hospital in Mossel Bay, was acquired. This contributed to the increased
number of registered hospital beds to 8 322 (including associate hospitals).
Dividends
The Board of directors has reviewed the dividend policy and has approved a
dividend cover of between 1.75 and 2.75 times.
The directors have declared a cash dividend of 29 cents per ordinary share
payable to shareholders.
To comply with the requirements of Strate the relevant details are:
Event Date
Last day to trade "cum" the dividend Friday, 17 December 2010
Shares to commence trading "ex" the
dividend Monday, 20 December 2010
Record date (date shareholders
recorded in books) Friday, 24 December 2010
Payment date Tuesday, 28 December 2010
No share certificates may be
dematerialised or rematerialised between Monday, 20 December 2010 and Friday, 24
December 2010 (both days inclusive)
Outlook
Life Healthcare is confident that the demand for private healthcare in South
Africa will continue due to the increasing disease burden and ageing medical aid
population. Taking into consideration the proposed growth in hospital capacity
as well as the business benefits of our efficiency programmes, Life Healthcare
is optimistic that historical growth rates will be maintained.
On behalf of the board
Professor Jakes Gerwel
Chairman
Michael Flemming
Managing director
30 November 2010
Executive directors: CMD Flemming (managing director), RJ Hogarth (financial
director)
Non-executive directors: Prof GJ Gerwel (chairman), MA Brey, YZ Cuba, Dr JPF
Dalmeyer, GC Solomon. MP Ngatane, PJ Golesworthy, LM Mojela, TS Munday
Company secretary: F. Patel
Registered Office: Oxford Manor, 21 Chaplin Road, Illovo. Private Bag X13,
Northlands 2116
Sponsors: RAND MERCHANT BANK (a division of FirstRand Bank Limited).
Note regarding forward-looking statements: The company advises investors that
any forward looking statements or projections made by the company, including
those made in this announcement, are subject to risk and uncertainties that may
cause actual results to differ materially from those projected.
For more information please visit our website: www.lifehealthcare.co.za
Date: 30/11/2010 13:26:03 Produced by the JSE SENS Department.
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