Slipping a bit
When looking at hospital group results, I read them as I would those of hotels – although the guests are forced to stay (for surgery) and the fees are mostly paid for by third parties (a medical aid). As such, one of the important numbers is occupancy levels and Life Healthcare’s South African hospitals recorded 69.9% occupancy in the latest results, compared with 70.7% in the previous period. The slight slip isn’t of great concern, and the group did add an extra 90 beds, but the question is how much higher this can go. Ideally high 70s may be possible, but with stiff competition, and weekends and public holidays impacting patient numbers, that number is a tough call – we should maybe expect occupancy levels of around 70%. We also saw margins slip from 28% to 27.7%, likely in part due to lower occupancies. The issue with healthcare generally is that governments around the world are concerned about the costs and this is bringing closer attention to the industry with a potential for legislation that could hurt profits. As such I prefer drug manufacturers in the healthcare space and in particular a generic drug manufacturer such as Aspen.