Life Healthcare delivered a healthy overall performance, despite challenging trading environments in most of the markets in which we operate. The strong revenue growth of 9.3% is a result of robust volume growth in the PET-CT contract in the United Kingdom and a strong H2 FY2019 performance in southern Africa.

Good progress has been made in the imaging market as well as broadening our business lines across the healthcare continuum in South Africa. Internationally, we are expanding our radiology product development business within Alliance Medical through Life Molecular Imaging (LMI).

To complement our growth focus, we have initiated several efficiency programmes for sustainability, which we expect will deliver substantial savings. These include nursing optimisation, improved procurement, capex optimisation, focusing on cost of sales management and other administrative costs. In addition, we continue to progress on our integration effort. The investment in these programmes impacted normalised EBITDA negatively by R124 million.

Life Healthcare attended the launch of South Africa's National Health Insurance (NHI). We look forward to continue to engage positively with the government to implement NHI in a sustainable manner, and ultimately to broaden healthcare access and affordability in South Africa.

Southern Africa

Revenue from southern Africa increased by 7.1% to R18.5 billion (2018: R17.2 billion). Revenue from hospitals and complementary services grew by 6.8% mainly due to a 5.8% increase in revenue per paid patient day (PPD) and a 0.8% growth in PPDs (2018: +1.1%). The increase in revenue per PPD is made up of a 4.8% tariff increase and a 1.0% positive case mix change. Even though the Group experienced negative activity volumes in the first half of the financial year (H1 FY2019: -0.3%), we delivered positive PPD growth of 0.8% for the full year due to strong PPD growth of 1.8% in H2 FY2019. This growth is largely due to doctor recruitment gains over the last two years, network gains and an increase in acuity from surgical cases. The overall weighted occupancy for the year remained in line with the prior year at 69.7%, with 49 brownfield expansion beds being added. Complementary services continued to show good growth with revenue increasing by 9.2%, benefitting from the opening of the new mental health unit, Life Brackenview in April 2019, and good growth in renal dialysis.

Healthcare services performed well with revenue growing by 12.2% largely due to new contracts gained by Life Employee Health Solutions.

Normalised EBITDA increased by 2.6% with an EBITDA margin of 23.8% for the year (2018: 24.9%). The EBITDA margin was impacted by the lower PPD activity in December 2018 and January 2019 which affected operational leverage in H1 FY2019, the cost of additional human resource capacity at a Group level to support growth initiatives and the initial cost of efficiency programmes which are expected to deliver future efficiency gains. Normalised EBITDA excluding corporate costs increased by 6.4%. This increase has been driven by the strong growth in H2 FY2019 combined with good cost management, resulting in the H2 FY2019 margin for normalised EBITDA excluding corporate costs increasing by 0.9% from H1 FY2019 to 29.5% (H1 FY2019: 28.6%).

The Group continues to improve on the overall patient safety adverse event rate and remained on par with the prior year with regards to the healthcare associated infection rate and patient experience scores. Life Healthcare became the first hospital group in South Africa to publish quality scores on a per hospital basis from October 2018. These scores can be viewed on Life Healthcare's website (www.lifehealthcare.co.za).

International

Diagnostic services' revenue grew by 13.4% to R5.6 billion (2018: R4.9 billion) driven by strong growth in PET-CT scan volumes in the United Kingdom (up 15.9%), the full year impact of the acquisition of the Italian clinics during H2 FY2018, the acquisition of scanning facilities in the United Kingdom in December 2018, and a solid underlying performance in Ireland. Normalised EBITDA increased by 3.9% to R1.3 billion (2018: R1.2 billion). The results were positively impacted by the weakening of the rand against the pound sterling and euro.

The normalised EBITDA margin decreased to 22.4% (2018: 24.5%). The margin was negatively impacted by supply challenges within our radiopharmacy production units while we are currently undertaking an 18-month planned refurbishment programme, resulting in increased costs. Excluding this impact the margin was 23.6%.

Healthcare services' (Scanmed in Poland) revenue for the year increased by 7.1% to R1 349 million (2018: R1 260 million). Normalised EBITDA increased to R97 million (2018: R85 million) resulting in the normalised EBITDA margin increasing to 7.2% (2018: 6.7%). Healthcare services' performance was impacted by reduced overquota referrals in FY2019, increased competition in orthopaedics, costs relating to IT automation projects and costs associated with the strengthening of the management team.

Regulatory changes impacted minimum employment costs in Poland primarily resulted in a R125 million impairment in the carrying value of the Polish investment in the Group's results during the year ended 30 September 2019.

Growth initiatives

Growth initiatives comprise the new outpatient business model, developing the imaging opportunity, investing in data analytics and clinical quality products within South Africa and product development internationally.

During the current year, Life Healthcare opened its first outpatient clinic. This pilot site delivered excellent learnings around the operating model and offering. In addition, it proved our ability to operate a low cost, efficient, high-quality service, with consistently high patient experience scores. The Group has launched a partnership with a large retailer to test the clinic model in-store, and is excited by the future opportunities presented by this expansion across the healthcare continuum. The normalised EBITDA loss for the year was R14 million.

The other South African growth initiatives contributed to a total EBITDA loss of R29 million during the current year.

LMI, our primary international growth initiative, performed better than expected and contributed revenue of R268 million (2018: R66 million) and a normalised EBITDA profit of R18 million (2018: loss of R45 million). The profit of R18 million includes a non-trading related exchange gain of R30 million. Excluding this non-trading item the normalised EBITDA loss was R12 million.

Disposal of equity investment in Max

The disposal of Max was concluded during the current year and funds were received on 21 June 2019. The results for the year include the profit on the sale of R1.5 billion before withholding tax of R94 million, transaction costs of R118 million and the loss on foreign exchange option contracts of R292 million (net of tax).

The net cash proceeds of R3.8 billion, after withholding tax, the hedge costs and transaction costs, was utilised to repay debt.

Group revenue increased by 9.3% to R25.7 billion (2018: R23.5 billion) consisting of a 7.1% increase in southern African revenue to R18.5 billion (2018: R17.2 billion); a 12.1% increase in international revenue to R6.9 billion (2018: R6.2 billion) and R269 million revenue contribution from growth initiatives (2018: R66 million).

Normalised EBITDA was impacted by investments in growth initiatives. The Group also implemented a number of efficiency programmes focusing on cost of sales management, improved procurement, nursing optimisation and other administrative costs. Although the benefits of these efficiency programmes started to realise in H2 FY2019 the full associated programme set-up costs of R124 million were expensed in the current year.

Normalised EBITDA excluding growth initiatives and investments in efficiency programmes increased by 5.3%.

The Group produced excellent cash flows from operations due to strong working capital management. The cash generated from operations increased by 7.7% on FY2018, and represented 103% of normalised EBITDA (2018: 99%).

The capex for the year was R2.3 billion (2018: R3.4 billion), comprising mainly of capital projects of R2.1 billion (2018: R2.2 billion) and new acquisitions (net of cash acquired) by Alliance Medical of R190 million. The maintenance capex for the year was R1.2 billion (2018: R878 million).

Net debt to normalised EBITDA as at 30 September 2019 was 1.96 times (30 September 2018: 2.73 times). The bank covenant for net debt to EBITDA is 3.50 times.

EPS increased by 62.4% to 176.4 cps (2018: 108.6 cps) primarily due to the impact of the disposal of Max.

The decrease of HEPS by 18.5% to 88.7 cps (2018: 108.8 cps) is due to the impact of the mark-to-market loss of R292 million (net of tax) on the Max foreign exchange option contracts, diluting HEPS by 20.1 cps. NEPS, which excludes non-trading related items listed below, increased by 5.6% to 116.4 cps (2018: 110.2 cps).

NEPS was impacted by the investments in growth initiatives and by the cost of additional human resource capacity created at Group level to support the growth initiatives. NEPS excluding the current losses on the growth initiatives is 118.5 cps (7.5% increase on FY2018).

The NHI bill was introduced to the South African parliament in August 2019 and is currently under review by the National Assembly's portfolio committee on health. A stipulated parliamentary review process and public participation process is under way. Stakeholders have been invited to submit written submissions to the portfolio committee by 29 November 2019. Life Healthcare welcomes this opportunity to contribute meaningfully to the dialogue in order to ensure that the bill is implemented in a sustainable manner. We are actively participating in the stipulated parliamentary processes in our own capacity as well as through the Hospital Association of South Africa (HASA) and Business Unity South Africa (BUSA).

The Competition Commission Healthcare Market Inquiry (HMI) was concluded and the findings were published on 30 September 2019. The HMI made a number of recommendations to the South African government. Life Healthcare ascribes to the principles of the inquiry and will respond to these findings based on what the government implements.

Each Alliance Medical region has reviewed its operations in the context of a hard Brexit. Within the UK, impact has already been felt over the last two years with a reduction of EU applicants for positions. This is being mitigated by increasing relationships with universities as well as recruitment drives from outside of Europe. Key supplier contingency plans have been reviewed. In a small number of instances this has resulted in an increased level of stock being held.

There have been no changes to the board of directors for the year ended 30 September 2019.

The board approved a final gross cash dividend of 53.0 cents per ordinary share for the year ended 30 September 2019. The dividend has been declared from income reserves. The dividend is subject to South African dividend withholding tax of 20%, which will be applicable to all shareholders not exempt therefrom, after deduction of which the net cash dividend is 42.4 cents per share.

The Company's total number of issued ordinary shares is 1 467 349 162 as at 20 November 2019. The Company's income tax reference number is 9387/307/15/1.

In compliance with the requirements of the JSE, the following salient dates are applicable:

Share certificates may not be dematerialised or rematerialised between Wednesday, 11 December 2019 and Friday, 13 December 2019, both days inclusive.

Tough operating conditions will remain, largely due to the slow economic growth in South Africa. The Group does, however, see good pockets of growth opportunities, both in southern Africa and internationally.

In southern Africa, the Group expects flat acute PPDs in a market of increased network arrangements and good growth in complementary services. The Group plans to add approximately 50 beds during the following financial year. Capex for the year is expected at approximately R1.3 billion, largely comprising of replacement capex. We will continue to focus on improving clinical quality, implementing new growth initiatives and driving our operational efficiency programmes.

Diagnostic services will complete the roll-out of the PET-CT 2 contract and the current refurbishment programme of radiopharmacy facilities. The additional radiopharmacy facility should be operational in FY2020, until then the business will continue to manage production carefully. We expect continued good growth in PET-CT volumes. The Italian operations will focus on growing the clinic business through acquisitions and consolidation of certain clinics. Capex for the year is expected at approximately R1.1 billion.

The Group is exploring strategic options to potentially exit Poland-based operations.

The Group will invest further into growth initiatives:

Life Healthcare's results for the six months ending 31 March 2020 are expected to show an increase of more than 20% in EPS (minimum increase of 4.9 cps to at least 29.4 cps) and HEPS (minimum increase of 5.4 cps to at least 32.3 cps) from those reported for the six months ended 31 March 2019 (EPS: 24.5 cps and HEPS: 26.9 cps). This is primarily due to the mark-to-market loss recognised in H1 FY2019 on the option contracts, taken out to protect the proceeds received on the Max disposal.

A detailed trading statement will be released mid-May 2020. The forecast financial information on which this trading statement is based has not been reviewed and reported on by the Group's external auditors.

Shareholders are advised that the investor presentation for the year ended 30 September 2019 is published on Life Healthcare's website (www.lifehealthcare.co.za).

The contribution of the doctors, nurses and employees of Life Healthcare have greatly enhanced the quality of our performance. We thank them for their contributions.

Approved by the board of directors on 20 November 2019 and signed on its behalf: