Group Chief Executive's review

These factors impacted our operational performance and our employees' wellbeing. Proudly, Life Healthcare's collective response to these socio-economic challenges and the Company's strong performance under tough conditions, has demonstrated our commitment to delivering on our purpose of Making life better.

The Group's financial results confirm the strength of our diversified strategy and the resilience of our international healthcare business.

In response to the clear national vaccination imperative the Group embarked on an unprecedented nation-wide vaccination drive and commissioned 22 Life Healthcare facilities and 320 of our own employees in administering the vaccinations across the country.

For our International operations, rapid vaccination roll-out and continued fiscal support from national governments across Europe and the UK led to a rapid recovery in demand for our healthcare services, particularly as restrictive lockdowns ended. We swiftly mobilised employees and facilities in response to public sector contracts for COVID-19-related services, thereby enhancing our relationships with public sector partners in the UK, Ireland and Italy.

Over the financial period, the commitment, spirit, and dedication of all our employees, doctors, healthcare professionals and stakeholders in our business has been unwavering. For this I want to express my utmost and sincere gratitude.

Given these tough conditions, our financial results are pleasing as we applied learnings and further adapted to more efficient ways of working within the constraints of a COVID-19 environment. Profitability improved, with revenues growing by 12.7% to R26.9 billion (2020: R23.9 billion) and normalised EBITDA growing by 21.6% to R5.1 billion (2020: R4.2 billion). We strengthened our balance sheet by focusing on cost efficiency and capital discipline. Given the good cash generation and the strength of our balance sheet we have now resumed dividend distributions. These financial results are elaborated on in the Group Chief Financial Officer's review and the operational reviews of our International and southern African businesses.

MAKING LIFE BETTER

Our purpose of Making life better has been amplified as our frontline workers fight against COVID-19 and continue to make a difference in our patients' lives. Ongoing lockdowns and travel restrictions, given the resurgent waves across the globe following novel viral mutations, continues to disrupt our normal way of life and business operations. The global COVID-19 socio-economic impact has been devastating as people come to terms with the new normal way of life.

We have witnessed devastating loss of life in our own Group, with 48 employees and 7 doctors who have passed away from COVID-19 to date. Every life lost is a life too many and every effort to curb further loss must be taken. As our Chairman already alluded to, the current evidence is clear: vaccinating against COVID-19 has extremely limited the possibility of adverse side effects, it significantly reduces the chance of infection by a factor of five and further reduces the chance of severe illness and death from COVID-19 by a factor of twenty. It is for this reason that we have now taken the first step to making vaccination mandatory before entering our Head Office from 1 December 2021.

The Board and the executive team spent considerable time deliberating on the best way forward and considered multiple viewpoints, with regards to a mandatory vaccine mandate for the Group as a whole. We have an obligation to provide safe workspaces for all our employees, doctors and healthcare professionals and the overall safety and wellbeing of our people has been at the heart of these discussions. It is our moral duty to be responsible and responsive in our fight against this virus.

Our local hospitals and our International operations, however, present complex situations where employees, supporting doctors, patients, suppliers and families of patients share a common space, with unpredictable workflows. Our approach will recognise these complexities and this part of the journey remains a focus going forward. It is our intention to implement mandatory vaccination protocols across all our facilities during the first half of 2022.

DEVELOPING AND RETAINING TALENT

People are our most important asset. They differentiate our business and are a core enabler for everything we do. We aim to create an inclusive and diverse working space where every person feels safe to express themselves in a supportive environment. The Group made significant progress with transformation, diversity and inclusion (see Social, ethics and transformation report) from an employee attraction and gender perspective. We continue to invest, develop and retain a pipeline of talent that will be able to serve our future needs and embrace cultural diversity.

An organisational re-structure of executive roles and responsibilities was completed. The restructure aimed to better align the operating model with our strategy. A Chief People Officer role was created (see Our people), we appointed a Group Chief Medical Officer (see Group quality review) as well as a new Group Company Secretary (see Corporate governance overview). The South African Executive was re-structured into Existing Operations, Business Disruption, New Business, and Support functions. Internationally, within LMI, a Chief Commercial Officer was appointed in the United States (US) to oversee and drive rapid global expansion of NeuraCeq® sales. Further to this, we also established a diverse Group Operating Committee (GOC), consisting of leadership across the southern Africa and International teams.

Following these changes, we are confident that the right people are in the right roles to deliver our strategy.

EXECUTING OUR STRATEGY

Our vision is to be an international healthcare provider, delivering measurable clinical quality through a diversified offering and people-centred approach. This continues to be the driving force in everything we do. Technology, data analytics and diversified and motivated employees are the enablers that underpin the execution of our strategy. The Group's strategic pillars of quality, growth, efficiency and sustainability remain core in achieving our Group strategy, which is to:

• Continue delivering clinical excellence and a leading patient experience.
• Return the southern African acute hospital business to its pre-COVID-19 levels of activities, improving operating margins and operational leverage.
• Grow our complementary businesses (including mental health, rehabilitation, renal dialysis and oncology), our Life Employee Health Solutions (EHS) business and Life Esidimeni.
• Grow our integrated molecular imaging business in Europe and the UK, while continuing to focus on providing the highest levels of patient care and technical excellence.
• Deliver on our key growth initiatives, including the expansion of NeuraCeq^® manufacturing and sales capabilities and progressing with our South African imaging acquisition strategy.
• Deliver responsible environmental, social and governance practices.

During the year under review, we experienced growth across all our business segments, with a particularly strong performance from our international segment. Our strategic progress is highlighted in our segmental reviews (see International business review and Southern African business review).

Our strategy enabled us to be resilient and sufficiently adaptable to the various challenges we faced throughout the year. As we look forward to 2022 and beyond, we will continue to review and refine our strategy with our Board. While we have provided details on our short, medium and long-term strategic objectives (see Our strategy) we remain nimble in our strategic execution.

Quality patient care remains a core priority for us and we are proud of our quality metrics achieved (see Group quality review). Our Group quality indicators continue to reflect our passion for providing patient-centred care despite the intense and prolonged pressure due to the COVID-19 pandemic. The commitment and unwavering care of our frontline employees for their patients is incredible. The commencing of our vaccination sites across the country has been a wonderful success story despite the enormous logistical effort required and the additional strain this had placed on our employees and other resources. The enthusiasm shown by our teams to support their local communities and our country with vaccines is heart-warming.

Quality patient care remains a core priority for us and we are proud of our quality metrics achieved.

Our Group quality indicators continue to reflect our passion for providing patient centred care despite the intense and prolonged pressure due to the COVID-19 pandemic.

Southern Africa

Our southern African operations, particularly the acute hospital segment, were impacted by the second and third COVID-19 waves, each of which was more severe and longer than prior waves. We had over 215 000 COVID-19 PPDs in the six-month period to 30 September 2021 versus c.150 000 in H1-2021 and c.130 000 in H2-2020.

Notwithstanding this, the acute hospital business continued to deliver progressive improvements in each six-month period since 31 March 2020. We have become more adept at managing the transition between COVID-19 waves and the related changes in case mix, when surgical and non-COVID-19 medical cases are displaced as COVID-19 cases surge and then wane. Consequently, we have seen PPDs improving gradually during the year, which has driven our occupancies upwards. We feel confident that we are now able to operate our acute hospital business with COVID-19 as the new normal.

Our complementary services have also seen a pleasing improvement over each consecutive six-month period since 31 March 2020. Life EHS saw a decline in lives covered through its contracted services, but was able to deliver strong revenue growth as the business rapidly expanded its service offering to cater for COVID-19-related demand. Life Esidimeni, as a long-term care provider for the public sector, remained resilient throughout the year.

For the year under review, the southern African business delivered 10.3% annual revenue growth, and normalised EBITDA margins continued improving to 17.1% for the full year, compared with the 16.6% we reported at H1-2021 and the 16.8% reported at 2020. The results are analysed in more detail within the Southern African segment review.

GROWING OUR BUSINESS

Life Molecular Imaging (LMI) is an important international growth initiative. Following the approval of Biogen's Alzheimer's disease modifying drug (DMD) Aduhelm^®, in June 2021, we invested in a commercial team to drive NeuraCeq^® sales. This opportunity could lead to a significant revenue uplift for LMI in future years (further discussed in International business review). We are also preparing ourselves for the introduction of Community Diagnostic Centres in the UK through a competitive tendering process. These one-stop diagnostic facilities within a community setting (as opposed to a hospital setting), are a compelling and convenient diagnostic model and we are confident that our capabilities and service delivery record will enable us to capitalise on some of these contracts.

Within the southern African business good progress has been made on our growth within the renal dialysis and oncology businesses. We acquired the North-West Dialysis Centre and continue to build our non-acute businesses in the southern Africa space.

Our South African imaging growth initiative is to own and operate imaging equipment within our hospital facilities and further develop imaging capabilities to be able to partner with government. This model is not different to how we operate our surgical and medical services, where the hospitals own the infrastructure and equipment, employ the staff, while the specialist doctors provide their clinical services. This is in line with the how radiology operates in many countries world-wide.

We strongly believe that we can improve accessibility and reduce cost of care by managing imaging services as part of our overall care pathway. On 10 September 2021 we received approval from the Health Professions Council of South Africa (HPCSA) to directly employ radiographers. This is a significant step forward and will enhance our ability to offer an integrated and cost-efficient imaging service in South African diagnostic units.

This will allow us to leverage the extensive diagnostic imaging experience within AMG to bring that experience to South Africa, and partner with radiologists to make radiology more accessible to the wider South African public. AMG operates in more than 20 European countries, employs 850 qualified radiographers and nuclear medicine technologists, together with a third-party network of more than 500 registered radiologists. Through this team AMG delivers 1.7 million complex diagnostic imaging and integrated molecular imaging procedures annually through 146 diagnostic imaging centres and 77 mobiles.

In November 2021, we announced that we have entered into a joint venture with AXIM to build and operate cyclotrons within South Africa. We will be building two cyclotrons in Gauteng initially. These will serve the molecular imaging market in South Africa, a market which we think has exciting growth potential over the next five to 10 years.

OUTLOOK

COVID-19 is likely to be with us for some time to come, perhaps even becoming a common virus, like the annual influenza viruses to which we have adopted. New mutations may produce COVID-19 variants, such as the recently identified Omicron variant, which may drive additional waves. We anticipate a fourth COVID-19 wave to emerge within South Africa towards the end of the 2021 calendar year. The timing and severity of this wave may be influenced by Omicron and may disrupt our operations again. However, we remain well positioned to deal with future waves and apply the lessons we have already learnt.

We will continue to focus on growing the business, improving efficiency and enhancing the quality of our patient care. Exciting growth opportunities across multiple geographies are being explored, and our respective management teams are motivated and incentivised to deliver on these.

We will continue to invest in modernising our IT infrastructure so that we can harness the power of data analytics to improve the patient journey, increase our efficiency and to enable better real-time decision making across our facilities.

We aim to introduce a comprehensive sustainability strategy during 2022. This strategy will position the Group to realise our commitment to reducing our environmental impact, while enhancing the sustainability of our business.

APPRECIATION AND CONDOLENCES

Thank you to all our employees, the senior management team and our Board for their continued effort and commitment in driving our business forward, particularly as we adapt to the new normal working environment.

My deepest condolences to those who have lost loved ones over the course of this pandemic.

To our employees, healthcare specialists, support services and doctors, thank you for your loyalty and dedication over the past year.