Private hospital group Life Healthcare’s revenue rose sharply in the half-year to end-March 2017 but operating profit growth was anaemic and the bottom line reflected a loss, as a result of the costs of a R14bn UK acquisition and further impairments to its Polish investment.
What the group calls total comprehensive loss/income swung to a loss of R341m, down 127.2% from a R1.253bn profit a year earlier.
Revenue was up 22.6% to R9.64bn and operating profit rose a slight 0.6% to R1.79bn.
Earnings per share fell 85.3% to 13.7c, and headline earnings per share (HEPS) dropped 71.3% to 26.7c.
In November 2016 Life bought UK-based imaging company Alliance Medical Group for as much as R14bn, including repayment of a debt of R4bn. Under the deal, about R700m of the payment was deferred, and subject to Alliance meeting performance targets.
Life paid for the acquisition with two bridging facilities, and it raised R8.8bn in a rights issue to pay down some of that debt. The group paid R713m in finance costs in the interim period, up sharply from R279m a year ago.
Alliance contributed just under R1.5bn to group revenue in the interim period — about 15% of the total — but R141m, or just under 8%, of operating profit.
In Poland, the Scanmed operation’s margins have been hit by regulatory changes to cardiology tariffs. Cardiology makes up 45% of that business. Tariffs were lowered by 17% from July 1, and fell again in January, resulting in a R142m impairment of that investment in the six months.
The board announced a dividend of 35c per ordinary share, with the alternative of a scrip dividend to be calculated at a 2.5% discount to the to the 15-day volume weighted average price. Shareholders have until noon on Friday, June 30 to make their choice.