Chairman's review

Over 259 million people have been infected with the virus and more than five million lives have been lost.

2021 has also been a year of remarkable scientific progress. Never before have we witnessed vaccine development and clinical trials completed with such speed and global collaboration. I am encouraged with the vaccination effort gaining momentum, but there is more to be done. A slower than anticipated vaccine roll-out coupled with uneven and inequitable distribution around the world will allow the virus to mutate further, resulting in increased resurgent infections and rising COVID-19 death tolls.

Together with my Board colleagues, the Group's dedicated management and employees, I look forward to building a business for the future that focuses on value creation for all our stakeholders.

MAKING LIFE BETTER

Our purpose of Making life better is at the heart of everything we do. It has also never been more relevant as we navigate through these turbulent times. As an international healthcare group, we are at the frontline facing the pandemic every single day.

Throughout 2021, despite the turmoil the pandemic has caused, we continued our uncompromising drive to improve our patients' experience and our clinical quality outcomes.

In our southern African operations, during 2021, we saw second and third COVID-19 waves, each of which was more severe as various mutations of the virus became more prevalent. In addition, South Africa's vaccination roll-out programme remains behind the national target of vaccinating 70% of the adult population by the end of 2021. This is a concern as more lives could be lost and further social, health and economic impacts could be experienced from a fourth and fifth wave. On a positive note, we were able to deploy lessons learned from prior waves with great effect.

With a considerable proportion of our local and international employees fully vaccinated against COVID-19, we had fewer employees off sick, at home isolating, or hospitalised due to illness. All of these factors have helped Making life better both for our own employees, and for the patients we continue to serve.

I look forward to building a business for the future that focuses on value creation for all our stakeholders.

We are proud to be supporting South Africa's response to the pandemic. Our employees have played an active and constructive role with the National Department of Health in SA, from developing and planning the roll-out of the EVDS system, the Sisonke vaccination programme, and the ongoing vaccination drive. We have 22 Life Healthcare vaccination sites manned by approximately 320 employees. We have administered a total of about 380 000 vaccinations to date. While this comes at a cost, and adds additional strain on our scarce nursing resources, we are delighted to be playing our part in protecting the public against the worst effects of the coronavirus.

Occupancies within our acute and complementary services have improved to 58.6% in H2-2021 from 57.4% in H1-2021 and 50.0% in H2-2020. These improved occupancies have helped to drive normalised EBITDA margins for our southern African segment to 17.6% in H2-2021, from 16.6% at H1-2021 and 8.5% at H2-2020.

Our International operations have weathered the pandemic very well after the initial restrictive lockdowns. With significant fiscal support from national governments across Europe and the United Kingdom (UK), jobs were preserved despite severe economic contractions. Funding for public healthcare was prioritised and private sector healthcare assets were contracted to help fight the pandemic. As a result, our International operations saw a quick rebound in activity levels, along with additional demand from public sector COVID-19-related contracts. Consequently, most of our International business segments have seen activities returning to pre-COVID-19 levels.

CHALLENGES IN THE POST-COVID-19 WORLD

Average life expectancies globally were increasing before the pandemic and we expect this trend to resume in a post-COVID-19 world. Coupled with an ageing population, we anticipate an increase in non-communicable diseases (NCDs), particularly lifestyle-associated diseases including heart disease and diabetes. In addition, we expect to see continued growth in the prevalence of cancer and dementia.

While all these factors will lead to increased demand for our acute and complementary healthcare services, there will also be an increasing demand for preventative healthcare measures including health and wellness services and diagnostic screening and testing. Our array of preventative services within southern Africa, and our vertically integrated diagnostic imaging businesses in Europe and the UK, all stand to benefit from these global healthcare trends.

This is not to say that the path ahead will be easily navigated. Our operating environment in South Africa remains challenged by several factors. There has been no growth in medical scheme lives for eight years, while an increasing percentage of medical scheme members have reduced their insurance coverage to reduce their premiums to more affordable levels. Simultaneously there has been a substantial increase in hospital beds in the market, particularly from independent hospital operators. In a market which has not grown, this has led to increasing pressure on occupancy levels in our hospitals, while also increasing the competition for our most important resources - our employees. Therefore, the recruitment and retention of our employed nurses, pharmacists, support employees and hospital management has become more complex and expensive. Medical specialists, who consult at our facilities and admit patients into our facilities, have other competing facilities to choose from. Shortages of healthcare personnel, in South Africa and internationally, are further driving up wage costs.

In South Africa, 81.4% (2020: 79.6%) of our employees are female, and 77.9% (2020: 76.4%) are African, Coloured and Indian (ACI) employees. Internationally 69.0% (2020: 69.0%) of our employees are female. ACI doctor recruitment in SA has also been particularly successful during 2021.

The sustainability of our business is dependent on how our business is governed. This includes how we manage business risks and our role as a good corporate citizen, whether as a force for social good or reducing our impact on the environment. Environmental, social and governance (ESG) factors are a key focus area for the Group. In 2021 we experienced noteworthy progress in our sustainability strategy and journey. We anticipate the formalisation of our sustainability strategy into actionable targets during 2022. In recognition of progress made, we received an upgraded rating from 'A' to 'AAA' from MSCI. MSCI is the world's largest provider of ESG indexes. A 'AAA' rating places Life Healthcare in a best-in-class category within the global healthcare sector.

NATIONAL HEALTH INSURANCE

Life Healthcare reaffirms its support of the South African government's national health insurance (NHI) plan. The NHI principles and objectives aim to provide access to affordable, comprehensive, quality healthcare services for all South Africans irrespective of socio-economic status. This will be the largest single undertaking by the South African government, and it is not solely government's responsibility but must be a collaborative effort between the private and public sector. For NHI to achieve its objectives, we would however need sufficient healthcare workers and facilities, appropriate standards, management skills, capital and appropriate reimbursement models. The one thing that this pandemic has emphasised, is the power of public and private sector collaboration and how much can be accomplished when working towards the same goal. Life Healthcare stands ready to co-operate with and assist the government where possible in delivering a successful NHI in South Africa.

We believe that the experience of our international operations, where government-led healthcare systems are the norm, will be invaluable in navigating the future of the healthcare industry in South Africa. In all the regions where we operate, we understand that effective and excellent healthcare depends on strong, long-lasting relationships between the public and private sector.

APPRECIATION AND CONDOLENCES

To our senior management team and our Board members, my sincere appreciation for your commitment, guidance and support in my first year as Group Chairman. I would like to thank my predecessor, Mustaq Brey, for the solid foundation laid during his tenure and I wish him everything of the best going forward.

To our almost 20 000 employees, nurses, support employees and doctors worldwide, thank you. I have personally witnessed the dedication, commitment and care shown by our team to all our patients, which makes me extremely proud to be the Chairman of Life Healthcare. For those of you who have lost loved ones and those who mourn the 48 Life Healthcare employees who have succumbed to COVID-19, the Board extends its deepest condolences.

To our patients, we continue to focus on improving people's lives through the delivery of high-quality cost-effective care, and we thank you for choosing us as your partner in health.