| Wed 16 Nov 2011, 17:37 | | LHC - Life Healthcare Group Holdings Limited - Audited group results and cash |
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LHC
LHC
LHC - Life Healthcare Group Holdings Limited - Audited group results and cash
distribution for the year ended 30 September 2011
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 DISTRIBUTION FOR THE YEAR ENDED 30
SEPTEMBER 2011
Life Healthcare Group
a world class provider of quality healthcare
Paid patient days (PPDs): +5,4%
Operating profit: +16,4% to R2 173 million
Revenue: +11,7% to R9 812 million
Normalised earnings per share: +28,7% to 119,3 cents
Earnings per share: +91,6% to 123,6 cents
Final distribution: 54 cents
Total distribution: 85 cents
Condensed consolidated statement of comprehensive income
for the year ended 30 September 2011
12 months 12 months
30 Sept 30 Sept
2011 Change 2010
R Million Audited % Audited
Revenue 9 812 11,7 8 786
Other income 102 94
Operating expenses (7 838) (7 023)
Gain on remeasuring of fair value of 92 -
equity interest before business
combination
Additional payment on previous 5 -
disposed business
Profit on disposal of business - 10
Operating profit 2 173 16,4 1 867
Fair value gains/(losses) on
derivative
financial instruments 14 (26)
Finance income 37 41
Finance cost (250) (342)
Share of associates` net profit 115 100
after tax
Profit before tax 2 089 1 640
Tax expense (597) (805)
Profit after tax 1 492 78,7 835
Other comprehensive income
Currency translation differences 2 (3)
Total comprehensive income for the 1 494 79,6 832
year
Profit after tax attributable to:
Ordinary equity holders of the 1 287 93,8 664
parent
Non-controlling interest 205 171
1 492 78,7 835
Total comprehensive income
attributable to:
Ordinary equity holders of the 1 288 661
parent
Non-controlling interest 206 171
1 494 832
Weighted average shares in issue 1 041 1 029
(`000) 523 883
Earnings per share (cents) 123,6 91,6 64,5
Headline earnings per share (cents) 119,5 88,2 63,5
Diluted earnings per share (cents) 123,6 91,6 64,5
Diluted headline earnings per share 119,5 88,2 63,5
(cents)
Headline earnings
Profit attributable to ordinary 1 287 664
equity holders
Headline earnings adjustable items
(net of tax)
Impairment of intangible assets 54 -
Gain on remeasuring of fair value of (92) -
equity interest before business
combination
Additional payment on previous (4) -
disposed business
Profit on disposal of businesses - (9)
Profit on disposal of property, (1) (1)
plant and equipment
Headline earnings 1 244 90,2 654
Condensed consolidated statement of financial position
for the year ended 30 September 2011
30 Sept 30 Sept
2011 2010
R Million Audited Audited
Assets
Non-current assets 6 775 6 194
Property, plant and equipment 3 753 3 258
Intangible assets 2 296 2 220
Other non-current assets 726 716
Current assets 1 693 1 678
Other current assets 1 293 1 196
Cash and cash equivalents 400 482
TOTAL ASSETS 8 468 7 872
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 3 518 2 849
Non-controlling interests 867 667
TOTAL EQUITY 4 385 3 516
LIABILITIES
Non-current liabilities 2 084 2 566
Interest-bearing borrowings 1 565 2 024
Other non-current liabilities 519 542
Current liabilities 1 999 1 790
Other current liabilities 1 539 1 340
Current portion of interest-bearing borrowings 460 450
TOTAL LIABILITIES 4 083 4 356
TOTAL EQUITY AND LIABILITIES 8 468 7 872
Condensed consolidated statement of changes in equity
for the year ended 30 September 2011
Total
capital Non-
and controlling Total
R Million reserves interest equity
Balance at 1 October 2010 2 849 667 3 516
Total comprehensive income for 1 288 206 1 494
the year
Profit for the year 1 287 205 1 492
Other comprehensive income 1 1 2
Transactions with non-controlling 12 - 12
interests
Non-controlling interests arising - 128 128
on business acquisition
Change in ownership that does not - 16 16
result in loss of control
Distribution to shareholders (625) (150) (775)
Treasury shares (6) - (6)
Balance at 30 September 2011 3 518 867 4 385
Balance at 1 October 2009 2 320 610 2 930
Total comprehensive income for 661 171 832
the year
Profit for the year 664 171 835
Other comprehensive income (3) - (3)
Share-based payment reserve 75 - 75
movement
Deferred tax on share-based 20 - 20
payment reserve modification
Transactions with non-controlling (19) - (19)
interest
Capital repayments to non- - (28) (28)
controlling interest
Distribution to shareholders (530) (86) (616)
Issue of shares at listing 4 341 - 4 341
Share repurchase (4 019) - (4 019)
Balance at 30 September 2010 (2 849) 667 3 516
Condensed consolidated statement of cash flows
for the year ended 30 September 2011
12 months 12 months
30 Sept 30 Sept
2011 2010
R Million Audited Audited
Cash generated from operations 2 562 2 233
Income tax paid (617) (396)
Net cash inflow from operating activities 1 945 1 837
Net cash outflow from investing activities (688) (695)
Net cash outflow from financing activities (1 378) (788)
Net (decrease)/ increase in cash and cash (121) 354
equivalents
Cash and cash equivalents - beginning of 482 101
the year
Cash balances acquired through business 39 27
combinations
Cash and cash equivalents - end of the year 400 482
Segmental report
During the reporting periods all the operating segments operated in Southern
Africa and therefore no geographical segments are presented.
Assets and liabilities are not reviewed on an individual segment basis but
rather on a Group basis and are therefore not presented.
There are no inter-segment revenue streams.
Year ended Year ended
30 Sept 30 Sept
2011 2010
R Million Audited Audited
Operating segments
Revenue
Southern Africa
Hospitals 9 136 8 140
Healthcare Services 674 636
Other 2 10
Total 9 812 8 786
Profit before items below
Southern Africa
Hospitals 1 917 1 595
Healthcare Services 141 118
Other 191 161
Operating profit before amortisation, 2 249 1 874
disposals and impairment of intangible
assets
Amortisation of intangible assets (110) (122)
Impairment of intangible assets (65) -
Profit on disposal of businesses - 10
Retirement benefit asset 2 102
Post-retirement medical aid - 3
Gain on remeasuring of fair value of 92 -
equity interest before business
combination
Additional payment on previous disposed 5 -
business
Operating profit 2 173 1 867
Fair value gains/(losses) on derivative 14 (26)
financial instruments
Finance income 37 41
Finance costs (250) (342)
Share of associate`s net profit after tax 115 100
Profit before tax 2 089 1 640
Operating profit before amortisation, disposals and impairment of intangible
assets include the segment`s share of shared services and rental costs. These
costs are all at market related rates.
Acquisition of investments
Increase in ownership interest in subsidiaries as a result of non-controlling
interest transactions
The Group had marginal increases in its shareholding in subsidiary companies.
Decrease in ownership interest in subsidiaries as a result of non-controlling
interest transactions
The Group disposed of a marginal percentage of its holding in subsidiary
companies to non-controlling interest.
The Group still maintained control over the subsidiary entities after the
decrease in ownership interest.
Business combinations
On 1 August 2011, the Group acquired additional 12.5% interest in Middelburg
Private Hospital (Proprietary) Limited and Middelburg Hospital Ltd (collectively
"Midmed") to obtain control over these entities. The Group previously had an
interest of 45% in Midmed which were previously accounted for as an associate.
Midmed had no significant contingent liabilities at the acquisition date.
From the date of acquisition, Midmed contributed to revenue of R33 million and
net profit of R8 million in the statement of comprehensive income.
2011
The following presents the impact on the consolidated
information of the Group as if the business combination
took place 1 October:
Revenue 187
Net profits 17
Details of the net assets acquired and goodwill are as
follows:
Purchase consideration
Total purchase consideration 173
Cash portion 38
Fair value of equity interest in Midmed held before the 135
business combination
Fair value of net assets acquired
Fair value of net assets acquired (271)
Fair value of non-controlling interest recognised 128
Goodwill 30
The fair value of the assets and liabilities arising from the acquisition were
as follows:
Aquiree
carrying
Fair value amount
R Million 2011 2011
Cash and cash equivalents 39 39
Inventories 2 2
Trade and other receivables 22 22
Property, plant and equipment 75 75
Trade and other payables (8) (8)
Loan accounts (3) (3)
Current income tax liability (7) (7)
Deferred tax (56) 2
Fair value of intangible assets acquired - 207 -
Hospital license
271 122
Goodwill on the acquisition of Midmed relates to the excess of the purchase
consideration over the fair value of the assets and liabilities acquired
including amounts paid for the expected synergies and anticipated profitability
of the business acquired.
None of the goodwill recognised is expected to be deductible for income tax
purposes.
The non-controlling interest associated with the unlisted Midmed acquisition was
measured at fair value. This fair value was determined by using the discounted
cash flow method with the key inputs being the discount rate and the expected
future growth rates.
The Group recognised a gain of R92 million as a result of remeasuring at fair
value its 45% equity interest in Midmed before the business combination.
Acquisition related costs amounted to R0,4 million and were expensed in the
statement of comprehensive income in other expenses.
Basis of presentation and accounting policies
These consolidated condensed financial results have been prepared in accordance
with IAS 34, "Interim Financial Reporting" and the AC 500 standards as issued by
the Accounting Practices Board and in the manner required by the Companies Act
of South Africa and the JSE Listing 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 2011. The
consolidated condensed financial statements should be read in conjunction with
the annual financial statements for the year ended 30 September 2011 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.
These financial results have been prepared under the supervision of Roger
Hogarth (CA)(SA), the Chief Financial Officer of the Group.
Report of the independent auditor
These results have been audited by PricewaterhouseCoopers Inc, registered
auditors. Their unqualified audit 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 of growth,
efficiency and sustainability. Activities as measured by hospital paid patient
days (PPDs), increased by 5,4% as a result of additional hospital beds,
particularly Life Bay View, Life Glynnview and brownfield projects combined with
the increased demand for hospital services due to:
- the high incidence of disease together with a growing and aging medical aid
population; and preferred network arrangements.
Financial performance
Group revenue increased by 11,7% to R9 812 million (2010: R8 786 million).
Hospital division revenue increased by 12,2% to R9 136 million (2010: R8 140
million) driven by the 5,4% increase in PPDs and a higher revenue per PPD of
6,3%. Healthcare Services revenues increased by 6,0% to R674 million (2010: R636
million). Life Esidimeni revenue was flat as the business stabilised in 2011
after the completion of two contracts in 2010 and Life Occupational experienced
a very good year as a result of new contracts and the selling of additional
services to existing clients.
The Group continues to focus on driving efficiencies across the business to
ensure services remain affordable and to improve margins. The alternative re-
imbursement model (ARM) provides an incentive to actively manage input costs,
which together with higher occupancies of 71,0% (2010: 69,5%) allowed the Group
to leverage efficiencies across it`s fixed cost base resulting in an operating
profit increase of 16,4% to R2 173 million (2010: R1 867 million).
A key management measure which is a non-IFRS measure of business performance is
normalised EBITDA (Life Healthcare defines normalised EBITDA as operating profit
plus depreciation, amortisation of intangible assets, impairment of goodwill as
well as excluding profit/loss and fair value adjustments on disposal of
businesses, surpluses/deficits on retirement benefits and the accelerated
employee trust charge) which increased by 17,3% to R2 548 million (2010: R2 173
million).
30 Sept 30 Sept
R Million 2011 2010
Normalised EBITDA
Operating profit 2 173 1 867
Profit on disposal of businesses - (10)
Additional payment on previous disposed (5) -
business
Gain on remeasuring of fair value of (92) -
equity interest before business
combination
Depreciation on property, plant and 299 263
equipment
Impairment of intangible assets 65 -
Amortisation of intangible assets 110 122
Employee Trust accelerated charge - 36
Retirement benefit asset movement (2) (102)
Post-retirement medical aid movement - (3)
Normalised EBITDA 2 548 2 173
Normalised EBITDA as % of turnover 26,0% 24,7%
Cash flow
The business generated healthy cash flows. Streamlined administrative processes
contributed to a tight working capital management resulting in cash generated
from operations before interest and taxes increasing by 14,7% to R2 562 million
(2010: R2 233 million).
Financial position
The group is in a strong financial position with low gearing. Net debt to
normalised Ebitda was 0,66 as of 30 September 2011. This low gearing provides
the Group with the financial flexibility to continue to invest and also to
complete it`s proposed Max Healthcare and Joint Medical Holdings Limited (JMH)
transactions.
Earnings per share (EPS), headline earnings per share (HEPS) and normalised
earnings per share
The earnings on a normalised basis, which excludes non trading related items as
set out below, increased by 28,7% to 119,3 cps (2010: 92,7 cps) and excluding
the amortisation of intangibles by 25,4% to 126,9 cps (2010: 101,2 cps). This
was largely due to the lower net financing costs following the re-financing of
the Group`s debt during 2010 and costs associated with the 2010 listing
including STC.
30 Change 30 Sept
Sept
R Million 2011 % 2010
Normalised earnings
Profit attributable to ordinary 1 287 664
equity holders
Adjustments (net of tax):
Profit on disposal of businesses - (9)
Additional payment on previous (4) -
disposed business
Gain on remeasuring of fair value (92) -
of equity interest before business
combination
Impairment of intangible assets 54 -
STC on listing - 322
Employee Trust accelerated charge - 36
Retirement funds (2) (76)
Listing cost - 17
Normalised earnings 1 243 30,3 954
Amortisation of intangible assets 79 88
Normalised earnings excluding 1 322 26,9 1 042
amortisation
Normalised EPS (cents) 119,3 28,7 92,7
Normalised EPS - excluding 126,9 25,4 101,2
amortisation (cents)
Distributions
The Company has revised its distribution policy. The distribution will be
determined taking into account the trading results, financial position,
commitments to third-parties and the requirements in respect of the business
plans and investment opportunities, subject to the JSE Listings Requirements.
The intention is to consider distributions twice annually. The board has
approved a distribution to shareholders of 54 cents per share (2010 - 29 cents)
consisting of a dividend of 18 cents per share (2010 - 29 cents) and a
distribution of capital out of share premium of 36 cents per share.
In compliance with the requirements of the JSE Limited, the following dates are
applicable:
Last day to trade cum the distribution Friday, 2 December 2011
Trading ex the distribution commences Monday, 5 December 2011
Record date Friday, 9 December 2011
Payment date Monday, 12 December 2011
No share certificates may be dematerialised Monday, 5 December 2011 and or
rematerialised between (both days inclusive) Friday, 9 December 2011
Capital expenditure
During 2011, Life Healthcare invested R780 million (2010: R813 million)
comprising capital projects of R740 million (2010: R516 million) including the
purchase of various hospital properties for R140 million and the business
acquisitions R40 million (2010: R297 million).
A further R686 million, excluding acquisitions, has been allocated for capital
expenditure projects in the 2012 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.
Changes to board of directors
LZ Brozin and CWJ Lyons resigned as Alternate Directors on 17 December 2010. PN
Boynton resigned as Alternate Director on 1 March 2011. Dr JPF Dalmeyer and YZ
Cuba retired as Non-Executive Directors on 27 January 2011. KM Gordhan, JK
Netshitenzhe and FA du Plessis were appointed as Independent Non-Executive
Directors on 30 November 2010.
Outlook
Growth
The group will continue to focus on its growth objectives in South Africa:
- Developing the breadth and depth of the Group`s existing hospital network,
through brownfield expansions
- Expanding our coverage and penetration in the South African market through
acquisitions, new builds and new lines of business.
The Group aims to add on an additional 350 beds in 2012.
Efficiency
The Group will continue to focus on driving operational efficiencies, cost of
sales procurement and management and increasing hospital occupancies to enable
the leveraging of the fixed cost base.
Sustainability
The Group will continue to focus on and expand it`s quality management programme
which is a comprehensive, consistently applied and measured programme which
benchmarks clinical interventions against international best practice with the
aim of enhancing patient outcomes. In addition the Group recognises the shortage
of healthcare skills and will continue to invest heavily in the training of
doctors, nurses and pharmacists. In connection with the development of
healthcare policy and proposed healthcare reforms the Group will continue to
actively engage with the South African government.
On behalf of the board
Professor Jakes Gerwel Michael Flemming
Chairman Chief Executive Officer
16 November 2011
Executive Directors: CMD Flemming (Chief Executive Officer), RJ Hogarth (Chief
Financial Officer)
Non-executive Directors: Prof GJ Gerwel (Chairman), MA Brey, KM Gordhan, JK
Netshitenzhe, FA du Plessis, 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
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 see: www.lifehealthcare.co.za
Illovo
16 November 2011
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 16/11/2011 17:37:00 Produced by the JSE SENS Department.
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