Slow growth halts Advanced Health's plans
Advanced Health puts expansion on ice and will revisit empowerment when it posts no loss
Advanced Health has shelved plans to bring in an empowerment partner -at least until it breaks even, the day surgery group’s CEO, Carl Grillenberger, said on Thursday.
Advanced Health owns day hospitals in Australia and SA, and listed on the JSE’s Alt-X in 2014. It has expanded rapidly in SA but has battled to attract patients to its 10 facilities in the country, resulting in sustained losses since its listing.
Unlike the US, where about 70% of all surgical procedures are done in day clinics, only 12%-15% of operations in SA’s private health-care sector take place in these facilities.
The amount Advanced Health lost in the six months to June
Day hospitals have generally received a cool reception from doctors, and have struggled to get medical schemes to direct patients to their facilities because they do not have a national footprint.
Only 54 day hospitals in SA are not held by the "big three" hospital groups — Netcare, Mediclinic and Life Healthcare — and they are clustered in the Western Cape and Gauteng.
On Thursday Advance Health reported a loss of R36.3m for the year to June. While an improvement on the R48.2m loss the year before, this was largely due to an improved performance in its Australian business. The group earns 71% of its revenue from its five day hospitals in Australia, two of which were acquired during this period.
Revenue from Australia grew 33% to R292m and from SA 30% to R117m, taking Advanced Health’s overall revenue for the year to end-June to R409m, a 32% increase on 2017’s R309m.
Headline losses per share improved to 14.12c, from 21.74c in the previous year, in line with expectations.
Advanced Health had "a couple of discussions" with potential empowerment partners, but there was no prospective deal in play at the moment, Grillenberger said. "The moment we are closer to break even or profitable, we will look at investors."
The target for break-even is October 2019, which is when he plans to hand over the reins of the company, he said. "I have agreed with the board of directors that I want to step down by October 2019 [and] leave a profitable business to the person who is going to take over."
The focus for the future was on improving patient volumes in SA, and it was holding talks with medical schemes and administrators to try to encourage them to direct more patients to its facilities, said Grillenberger.
"Funders should inform patients about the cost difference [between day hospitals and acute hospitals]. If it is cheaper, why not use the day hospital?"