Life Healthcare Group’s JSE shares closed in the green on Thursday, rising 2.7% to R23.76 after showing resilience in its full-year results through the end of September 2021. It reported a 128% rise in shares. earnings and an increase in the group. income, despite having to fight for two years from the Covid-19 pandemic.
South Africa’s second-largest private hospital operator said challenges related to the pandemic, including increased operating costs, the need to increase staff capacity, and additional spending on Covid-19 equipment, are putting significant pressure on the group’s profit margins.
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However, as more people get vaccinated and fewer Covid-19 patients fill hospitals, healthcare groups like Life are seeing more non-Covid-19 patients entering hospitals to seek medical interventions, which helps. for the balance of the group to recover towards pre-pandemic levels. .
“It’s a very good set of results; their turnover has increased, their profits have increased significantly and their UK operations have performed very well, ”FNB Wealth and Investments portfolio manager Wayne McCurrie explains to Moneyweb.
McCurrie says Life Healthcare’s results are in line with those of its competitors, indicating that people are returning to hospitals, helping companies in the sector return to pre-pandemic performance levels.
He adds that exceptional performance in this sector will result in an increase in health stocks.
Faced with all these challenges, the hospital operator reported an increase in revenue from the continuous operations group of 12.7% to R26.8 billion (2020: R23.8 billion).
Overall earnings per share (Heps) increased 128% to 111.1 cents (2020: 48.7 cents).
After-tax earnings amounted to 1.85 billion rand, up from 38 million rand in 2020, but still a far cry from the 2019 pre-pandemic level of 877 billion rand.
Life Healthcare also made the decision to resume dividend payments at 25 cents per share during the period.
The group’s performance in southern Africa has been supported by an increase in elective surgery patients. Income from operations in the region increased 10.3% to R19 billion, while normalized earnings before interest, taxes, depreciation and amortization margin (Ebitda) increased from 16.8% in 2020 to 17.1 % in the current period.
The group’s Alliance Medical Group (AMG) segment, which has a presence in Europe and the UK, also delivered exceptional results, with revenue of R 7.5 billion (2020: R6.3 billion previously), an increase of 18.9 %.
The AMG segment experienced an Ebitda margin gain to 24.2% from 20.9% in 2020. These gains were driven by the winning of Covid-19 related contracts and the underlying demand for imaging services in the UK, Ireland and Italy.
Resilience across the industry
Meanwhile, Netcare, in a business update released in late October, cited pandemic-related costs as one of the main pressures on its profit margins.
The hospital operator reported that it had treated a total of 126,130 patients since the pandemic began in March 2020, the majority of whom (97,076) were treated in the 2021 full-year reporting period ending on 30 of September.
Despite this, Netcare expects to report strong results for the full year, and the group’s revenue is expected to be 11-12% higher than the prior year. The group also managed to reduce its debt level by R1.1 billion, despite being under financial pressure.
Hospital chain operator Mediclinic International presented a similar picture in its semi-annual results for the period ending September 30, even though it cautiously withheld a dividend to maintain its liquidity position.
Mediclinic reported an increase in Heps from 2.4 pence in the comparable 2020 period to 8.8 pence in the current period, further reporting a 12% increase in revenue to £ 1.58 billion, a 4% higher than the 2019 pre-pandemic levels.
The fourth wave of Covid-19, which is said to be fast approaching, remains a concern for hospital operators.
Life Healthcare has taken a cautious approach to growth, choosing to leverage its existing plans rather than looking for new avenues of growth, especially in its operations in South Africa.
“For our operations in southern Africa, we are cautiously confident that we can deliver continuous PPD [paid patient day] growth, improved occupancy and normalized expansion of the Ebitda margin during 2022, while anticipating the continued negative impacts of the possible fourth and fifth waves of Covid-19, ”said the group.
The hospital operator says it plans to continue its efforts to enter the South African imaging market, which is already established in its international segment.
Listen to Ryk van Niekerk’s interview with Life Healthcare CEO Peter Wharton-Hood (or read the transcript here):