CEO of Life Healthcare Group Shrey Viranna. Picture: FINANCIAL MAIL/FREDDY MAVUNDA
CEO of Life Healthcare Group Shrey Viranna. Picture: FINANCIAL MAIL/FREDDY MAVUNDA

Private hospital group Life Healthcare is reviewing its Polish operations, which have been buffeted by steep tariff cuts from that country’s government.

Like its JSE-listed rivals Netcare and Mediclinic, Life Healthcare has sought offshore growth opportunities to counter the constraints facing its South African business but has had mixed success with its acquisitions.

While it is confident in its European diagnostic business Alliance Medical, it is in the final stages of selling its stake in the Indian hospital group Max Healthcare and is weighing the future of its operations in Poland, where it owns the Scanmed hospital group and provides diagnostic services through Alliance Medical.

Scanmed gets 80% of its business from the government and is highly vulnerable to tariff cuts. It is still recovering from a double-digit tariff cut in 2017.

“It (Scanmed) has had quite an unfortunate time of late,” said Life Healthcare CEO Shrey Viranna, as the company released its interim results for the six months to March 31.

The Polish operations reported a 30% drop in normalised earnings before interest, tax, depreciation and amortisation (ebitda), which fell to R42m for the period under review.

Viranna said management was considering several possible scenarios for Poland, including partial or full divestiture from Scanmed. Management was also weighing up the prospects for further investment in diagnostics in the region.

Aeon Investment Management analyst Zaid Paruk said the Scanmed business was a concern to investors, due to uncertainty about government tariffs. “Their international business and expansion is quite positive relative to their rivals, but there is a question mark over what they are going to do there. If they can get out of Scanmed at the right price it would beneficial to them,” he said. 

Net profit nearly halved in the period under review, partly due to a R256m mark-to-market loss (net of tax) on foreign-exchange option contracts Life Healthcare entered into to protect the sale of its stake in Max Healthcare, which it expects to finalise in June.

The loss will be offset by the higher proceeds and related profit on the disposal, it said.

Correction: May 31 

An earlier version of this article incorrectly said that Zaid Paruk is an analyst at Avior. He is an analyst at Aeon Investment Management. 

Half-year group revenue rose 9.5% to R12.4bn, while interim profit after tax fell 46.9% to R498m. Ebitda, which strips out nontrading costs and once, grew 2.2% to R2.7bn.

The group raised its interim dividend by 5.3% to 40c a share.

“Despite a challenging health-care trading environment, our focus on operational excellence has delivered a healthy overall performance,” the company said. “While we expect tough operating conditions to remain, we are optimistic about the group’s growth prospects both in Southern Africa and internationally.”

In SA, the company is in talks with the government “to explore ways to improve access to quality health-care in the country”. In other markets, the company is expanding its radiology product development business within Alliance Medical.

Viranna, said growth in revenue per paid patient days in the second half was expected “to be marginally positive”.  The group would add 80 mental-health beds and organic capital expenditure for the full year was expected to be about R1.1bn.