Life Healthcare hit by options contracts


Life Healthcare hit by options contracts


Published Date: 2019-05-31 | Source: Stephen Gunnion | Author: Stephen Gunnion

Life Healthcare hit by options contracts

The hospitals group entered a number of hedges when it sold its investment in India's Max Healthcare but it says these will be offset by the profit it makes.

Life Healthcare has reported what it's described as healthy interim results despite a challenging trading environment. But the private hospitals group was hit by impairments, transaction costs and a loss on options contracts following the disposal of its investment in India's Max Healthcare.

Its hospitals in Southern Africa were affected by a lull over December and January, as well as lower admissions for respiratory problems and a decline in scope procedures. Internationally, it reported much higher revenue from diagnostics services thanks to growth in PET-CT (positron emission tomography-computed tomography) scans, the inclusion of clinics it bought in Italy and the acquisition of three scanning facilities in the UK. It said its Irish business did well too. Polish unit Scanmed reported a big decrease in profitability due to reduced overquota referrals, increased competition in orthopaedics, and costs relating to IT automation projects and the strengthening of its management team. The 5.4% depreciation of the rand against the pound over the period helped boost offshore revenue.

Life Healthcare entered a number of foreign exchange options contracts when it sold its investment in Max Healthcare to mitigate the risk of currency fluctuations until the final closing of the transaction, which is expected by the end of next month. The marked-to-market loss on the options contracts in place for the period to end-March was R256 million, net of tax. However, it said the loss would be offset by the higher proceeds and related profit on the disposal.

Revenue rose 9.5% to R12.4 billion in the six months to end-March, with Southern African revenue up 5.8% and international revenue rising 20%. Normalised earnings before interest, tax, depreciation, and amortisation increased by 2.2% to R2.7 billion, impacted by tough trading conditions and investments in growth initiatives. Net profit fell 54% to R357 million and headline earnings per share (EPS) halved to 26.9c. Normalised EPS, which exclude non-trading items, fell 9.4% to 49.1c and it's raised its interim dividend by 5.3% to 40c per share.

Life Healthcare said full-year growth in paid patient days in Southern Africa is expected to be marginally positive and it expects continued strong growth in PET-CT volumes in Europe. Full-year EPS are likely to be more than 20% higher than last year due to the impact of the Max Healthcare disposal.

Its shares closed 0.6% higher at R23.21 yesterday.


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