SHARE PRICE DIPS
Life Healthcare in line for earnings drop
The hospital group lowers its headline earnings a share forecast following the Alliance Medical acquisition
Life Healthcare’s share price fell 0.31% to R28.70 on Wednesday as the market reacted to the announcement that it was expecting lower headline earnings a share for the six months ending March.
The hospital group said headline earnings a share would be below that of the comparable period in 2016, primarily because of the effect of the acquisition of Alliance Medical in a deal worth between R240m and R260m. Interest related to the transaction was estimated to run up to R390m.
However, the group’s share price has been climbing for the past three weeks after nearly all of the shares in Life Healthcare’s first rights offer were snapped up. They raised R9bn in that offer to fund the 2016 acquisition of Alliance Medical Group.
Life Healthcare said the updated contingent consideration, estimated to be 23.3c-27.9c a share, also contributed to the effect on headline earnings.
The hospital group also attributed the decline to one-off items related to an investment in Poland where R15m was required as a result of the additional reduction in tariffs in cardiology from January 1. Life Healthcare expected normalised earnings before interest, tax, depreciation and amortisation to be up to 2.5% lower than the previous year because of lower trading volumes in the southern African operations and the effect of losing the Gauteng mental health contract in July 2016, resulting in the Life Esidimeni tragedy.