Business Maverick

HOSPITAL GROUPS

Robust results for Life Healthcare, while Mediclinic bows out of listed market with flurry of expansions

Robust results for Life Healthcare, while Mediclinic bows out of listed market with flurry of expansions
(Photo: Gallo Images / Luba Lesolle)

Hospital group Life Healthcare saw a strong recovery in activity in southern Africa during the second half of the year to September after a slow start due to the Covid impact.

Life Healthcare’s group chief executive, Peter Wharton-Hood, says the normalisation of activities following Covid disruptions in previous years is clearly evident from the 15.8% year-on-year growth in acute hospital admissions, 14.8% growth in theatre minutes, and 13.8% growth in mental health admissions.

“For our southern African operations, we currently anticipate continued volume growth driven by the normalisation of our case mix, as well as introduction of new funder network deals. We also expect continued progress in expanding non-acute services within our operations by the launching of new clinical products in partnership with funders and select acquisitions in non-acute businesses,” he says.

During the year under review, Life Healthcare bought the non-clinical operations of the East Coast Radiology business and the Eugene Marais Radiology business in South Africa. The two acquisitions contributed R94-million to revenue. Group revenue from continuing operations inched up by 5% to R28.2-billion. This included R20-billion revenue from southern Africa, R7.7-billion from international operations and R555-million from growth initiatives.

Wharton-Hood notes that inflationary pressures around the world have increased and are likely to continue to affect salary increases as well as cost increases of consumables.

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“The severity of these factors is very different in each market and is dependent on the customer base, the nature of government support and public salary increases. We expect the impact to be less severe in southern Africa, where we have historically demonstrated our ability to manage these pressures through stringent cost management, increasing operational leverage and negotiating tariff increases. 

“The impact may be more pronounced in some of our international operations where we may not receive adequate pricing adjustments to mitigate pressure on our margins. We are working at containing cost increases and introducing other mitigating actions,” he says.

Life Healthcare says its R2.9-billion capital expenditure spend in the next financial year will be funded from internal sources or debt. When it comes to the hospital group’s debt, management seems comfortable that it is in a strong financial position, with net debt to normalised Ebitda (earnings before income tax, depreciation and amortisation) at 1.89 times, compared with the 1.82 times reported a year ago. The available undrawn bank facilities stood at R4.4-billion at year-end.

In addition, the group, through its funding company, Life Healthcare Funding, launched its inaugural listed domestic medium-term note programme this year, successfully raising R1-billion across three- and five-year tenures.

Mediclinic group growth

life healthcare mediclinic

Mediclinic’s Panorama Hospital (Photo: Gallo Images / Misha Jordaan)

Meanwhile, in its last public set of financial reports, competitor hospital group Mediclinic this week reported a 10% growth in group revenue to £1.7-billion (R34.9-billion) for the six months to September, although the adjusted operating profit of £131-million was down 11% on the previous year. Earlier this year, Mediclinic agreed to a £3.7-billion takeover by Remgro acting in a consortium with the Mediterranean Shipping Company (MSC). The sale places an implied enterprise value of about £6.1-billion on the hospital group.

Chief executive officer Ronnie van der Merwe says the impact of seasonality and the worsening wider macro-economic environment was clearly reflected in the results.

“Increasing macro-economic uncertainty, inflationary pressures and the risk of further Covid-19 and related disruptions to staffing and scheduling, will likely impact the previously anticipated sequential increase in patient activity in Switzerland and the Middle East, and limit the group’s ability to fully offset incremental cost increases in the two divisions,” he says.

Despite this dire prediction, the hospital group has been expanding across all territories. In Switzerland, Mediclinic opened its fifth Opera Bern day-case clinic and has paved the way to create a regional radiological-diagnostic care network with the merger of four Hirslanden radiology institutes in Zurich. In southern Africa, it opened two new day-case clinics to make up a total of 14 such clinics. Other acquisitions include the Crescent Clinic mental health facility in the Western Cape and the biomedical research company Artisan Biomed in October.  

Van der Merwe says Mediclinic anticipates that it will open a 236-bed private hospital in Saudi Arabia with the Al Murjan Group in the 2023 calendar year. DM/BM

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