A welcome jump of 33% in shares
PRIVATE hospital operator Life Healthcare said it expected its revenue to increase between 20 percent and 25 percent for the six months to end March, primarily due to the inclusion of the results of Alliance Medical which was acquired in November.
The company said it expected its normalised earnings before interest, tax, depreciation and amortisation (Ebitda) to increase between 11 percent and 15 percent compared to the period in 2016.
The group, however, said the Alliance acquisition could have a negative impact on its earnings. “Earnings per share and headline earnings per share are expected to be below the comparative period last year, primarily due to the impact of the acquisition of Alliance Medical and once-off items related to the investment in Poland,” the group said.
It said the revenue from Southern Africa was expected to grow marginally between 3.5 percent and 5.5 percent over the comparable period in 2016.
“Revenue was negatively impacted by the lower volumes in the hospital division in paid patient days (PPDs) of between 0.9 percent and 1.2 percent below last year,” the group said.
Life Healthcare said the numbers of PPDs as of the end of February showed an improvement as a result of better trading in March as well as Easter being in April in 2017 as opposed to March in 2016.
No growth
“Overall lower volumes have been due to limited or no growth in the private healthcare market, a greater than expected slowdown in the South African economy, an increase in active case management by medical aids away from hospital admissions and doctors going on holiday for longer periods and more frequently than anticipated,” the group added.
The group said lower PPD volumes caused occupancy levels to reduce from 69.9 percent in the comparable period to an estimated level of between 68 percent and 69 percent. The number of beds in operation had, however, increased from 8 557 as at March 31, 2016, to 8 702 as at March 31, 2017.
Despite the lower trading in the Southern African Hospitals division, the Healthcare Services division continued to show good growth with revenue increasing by between 20 percent and 24 percent.
The group said it expected the normalised Ebitda for the Southern African operations to be between 2.5 percent and 3.5 percent below the similar period last year. It attributed this to lower trading in the Southern African operations and the impact of the loss of the Gauteng Mental Health contract in the Healthcare Services division in July 2016.
The Polish operations performed to expectations, but normalised Ebitda will be significantly below last year as a result of the impact of the reduction in tariffs as promulgated in Poland effective from July 1, 2016, and further cardiology tariff reductions from January 1, 2017.
Life Healthcare shares dropped 4.34 percent on the JSE yesterday to close at R26.20. PLATINUM miner Lonmin climbed the most in 14 months as the rand weakened further, reducing the probability that the world’s third-largest platinum miner needs to raise more funds. The stock climbed 33 percent to 114.75 pence (R19.58) a share, the highest since March 1. The rand dropped 0.9 percent versus the dollar and has slid more than 9 percent since President Jacob Zuma ordered Finance Minister Pravin Gordhan home from a roadshow before firing him in a cabinet reshuffle. Lonmin, which raised about $400 million (R5.48 billion) in a life-saving rights offer in 2015, burned through 70 percent of its cash in the final quarter of last year as a low platinum price combined with falling production from its biggest shaft. The recent rand weakness makes further fundraising less likely, because it lowers the miner’s costs, said Arnold van Graan, a Johannesburg-based analyst at Nedbank Capital. A basket of platinum group metals priced in rand, an indicator of Lonmin’s revenue, has climbed 11 percent since March 24. The miner pays most of its costs in the local currency. “Lonmin is the platinum stock most geared to the rand, so it’s been helped by recent weakness in the currency,” Van Graan said. “As the rand-PGM basket price climbs, the cash burn should decrease, reducing the possible need for external funding.” Short interest in the stock has steadily increased in the past few months, rising to 8.7 percent of shares outstanding as of Tuesday from 2.7 percent on January 31, according to data compiled by IHS Markit. “The high level of short interest in the stock is creating additional volatilit,” Van Graan said. – Staff Reporter