Picture: ISTOCK
Picture: ISTOCK

 Hospital group Life Healthcare’s business units are firing on all cylinders with new CEO Shrey Viranna managing to improve revenue and profits across the group. 

The share price of SA’s second-biggest hospital operator climbed more than 7% on Friday, following the release of healthy results, with its revenue  rising 12.9% to R23.5bn, and headline earnings per share up 40.6% to 108.8c. The group declared a final dividend of 50c per share, up 11.1% on the 2017 financial year.

Viranna, who became CEO in November 2017, has managed to improve profitability at Life Healthcare’s businesses, which include its Southern African hospitals, UK radiology services provider Alliance Medical and Polish medical services provider, Scanmed S.A.

He said his plan to make Life Healthcare less reliant on its private acute hospitals business had led to strong returns. The group had increased its focus on specialised diagnostic services in Europe. 

Weak economic conditions meant private hospitals were seeing fewer visitors so Life Healthcare had needed to find other revenue sources.

As much as 35% of group revenue was now derived from outside the acute hospital business compared with 28% in the 2017 financial year, he said.

Private hospital operators measure their performance in “paid patient days” (PPDs).

The group’s Southern African acute hospitals enjoyed positive PPD growth of 1.1% compared with 2017 when they returned a negative 1.7%. As many as 131 beds were added to the acute hospital business during the year. Southern African revenue increased 8.5% to R17.2bn compared with 15.9bn in 2017.

Alliance Medical had a strong year  due to acquisitions in Italy and Ireland, and its contribution to Life Healthcare’s overall earnings was enhanced because of the rand weakening against the pound and euro. It acquired Italian clinics Imed and Centro Alfa, as well as Indian group Piramal Imaging SA during the reporting period. 

The business unit’s revenue increased 30.8% to R5bn from R3.8bn a year ago.

Scanmed’s revenue for the year increased 15.1% to R1.26bn as the management team put in place to turn the business around continued to achieve strong results.

Life Healthcare was also on track to sell its stake in Indian group Max Healthcare to global investment firm Kohlberg Kravis Roberts & Co at a price of 80 rupees per share or R4.3bn before costs. 

A senior equity analyst at Sasfin Wealth, Alec Abraham, said Life Healthcare’s results had impressed him. 

“These results were ahead of my expectations. The group has gained some momentum under Viranna. In my opinion, the diversification of the scope of operations from purely acute hospital care into diagnostics through Alliance and other longer-standing initiatives such as mental health is the main positive and differentiation angle from its local peers,” he said.

But Abraham said the company, along with its peers, would have its work cut out in 2019 given the lack of growth in SA’s economy. 

“Life Healthcare, Netcare and Mediclinic could also face pressures next year. The low economic growth, nonexistent employment growth and strain on consumers will likely to put continued pressure on medical aid membership; the key source of private hospital providers in SA,” he said.

Life Healthcare’s share price closed 7.62% higher at R26.42 on Friday. 

andersona@businesslive.co.za