Despite continued concerns about the affordability of private health services, Life Healthcare recorded double-digit growth in earnings in the six months to March as volumes were boosted by an increase in the number of days spent by patients in hospitals.
There are also more people using the private hospital group’s facilities through the network arrangements it has with various medical schemes, which restrict members to utilise certain facilities.
Normalised earnings per share rose 35.9 percent to 51.1c, while operating profit rose 20.1 percent to R987 million.
Revenue surged 12.7 percent to R4.7 billion and cash generated by operations gained 30.2 percent to R1bn.
Paid patient days increased by 6.4 percent because of increased demand for hospital services. This also contributed to an improved occupancy of 69.5 percent, compared with 68.2 percent last year.
Michael Flemming, the managing director at Life Healthcare, said the increase in the number of paid patient days exceeded expectations. He said that the network arrangements with the schemes had been successful as they helped to attract new people who were previously uninsured, and to keep people in the system who might have otherwise left because of private health-care costs.
“There are about 4.5 million people who earn above the tax threshold but who are uninsured. We believe that through these network arrangements, we can look after them and take the burden from the government,” said Flemming.
Mark Ansley, a portfolio manager at Cadiz Asset Management, was impressed by the numbers, saying the company was growing and it looked like there was opportunity for further growth. “Risks associated with the business are quite scarce and it seems it is really the skills issue that they are more concerned about and not regulation. The business is growing very well,” he said.
In the period under review, the group added 93 beds. In the second half of the year, it will spend R535m on various projects aimed primarily at building capacity at its facilities and commissioning 260 beds.
Flemming said: “We have brown field projects, a new hospital in Piet Retief, additional beds in Durban and Mpangeni. We will be buying some properties which we have been leasing.”
Ansley commended the company’s decision to pay a dividend of 31c per share.
“They were holding back on that distribution because they have been looking for an international acquisition but it looks like that is not going to happen soon,” he said. Instead, it is considering a small hospital group in Nigeria.
Life Healthcare shares rose 0.55 percent to close at R16.49. - Business Report