Directors' report

FOR THE YEAR ENDED 30 SEPTEMBER 2019

 

The directors have pleasure in submitting their report on the annual financial statements of the Group and the Company for the year ended 30 September 2019. The directors are of the opinion that stakeholders' interests are best served by presenting the Group's annual financial statements separately from those of the Company. The latter financial statements appear in company financial statements.

Nature of the Business

Life Healthcare Group Holdings Limited is an investment holding company and through its subsidiaries, associates and joint ventures operates and has extensive interests in private healthcare facilities and healthcare services companies in southern Africa and Poland and provides diagnostic-related services and sells radiopharmaceuticals in the United Kingdom and various European territories. The Group is listed on the main board of the JSE Limited.

Summary of financial performance and overview

Life Healthcare delivered a healthy overall performance, despite challenging trading environments in most of the markets in which we operate.

The increase in Group revenue by 9.3% to R25.7 billion (2018: R23.5 billion) consisted 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).

Earnings per share (EPS) increased by 62.4% to 176.4 cps (2018: 108.6 cps) primarily due to the impact of the disposal of Max Healthcare Institute Limited (Max).

The decrease of headline earnings per share (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. EPS on a normalised basis, which excludes non-trading related items, increased by 5.6% to 116.4 cps (2018: 110.2 cps).

The Group produced excellent cash flows from operations due to strong working capital management.

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).

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.

The Group's earnings were impacted by the impairment of R125 million relating to the Polish investment as well as the impairment of software development costs in southern Africa.

The financial statements herein fully set out the financial results of the Group and Company.

Special resolutions

The following special resolutions were passed during the course of the year:

• General authority to repurchase Company shares
• General authority to provide financial assistance to related and inter-related companies
• Approval of non-executive directors' remuneration

Distributions to shareholders

The Company considers an interim and final distribution in respect of each financial year.

The Company had the following cash distributions during the current financial year:

Date dividend paid	R'm	Cents per share	Type of distribution
18 December 2018	734*	50.0	Final 2018
24 June 2019	587*	40.0	Interim 2019

* A dividend withholding tax of 20% is applicable to all shareholders not exempted therefrom.

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.

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

Last date to trade cum dividend	Tuesday, 10 December 2019
Shares trade ex the dividend	Wednesday, 11 December 2019
Record date	Friday, 13 December 2019
Payment date	Tuesday, 17 December 2019

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

Board of directors

The names of the directors in office at the date of this report are set out here. The remuneration and interests of the directors are set out in note 27 to the annual financial statements.

Changes to board of directors

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

Resignation of Group Company Secretary

Fazila Patel has resigned as Life Healthcare's Group Company Secretary with effect from 31 January 2019.

Appointment of Group Company Secretary

Avanthi Parboosing was appointed as Life Healthcare's Group Company Secretary with effect from 1 March 2019.

Interests of directors

No change in the interests as set out in note 27 has occurred between 30 September 2019 and the date of this report. No arrangements to which the Company is a party existed at year-end that would enable the directors or their families to acquire benefits by means of the acquisition of shares in the Company, other than the long-term incentive scheme in respect of executive directors.

There were no contracts of any significance during or at the end of the financial year in which any director of the Company had a material interest.

Secretary

The address of the Group Company Secretary is the same as the Company's registered address.