Currently viewing: Our business model / Next: Our operating environment
Our purpose is Making life better. In order to achieve this, we have a well-developed business model which takes into account the following key factors:
Inputs
Our ability to deliver high-quality, people-centred care and generate value for all stakeholders involves various capital input resources.
FINANCIAL CAPITAL
The sustainability of our Group depends on how efficiently we manage the pool of funds entrusted to us by our shareholders and capital providers. Funds include equity capital, short and long-term loans, as well as profits generated from our business activities and investments.
R19.2 billion equity
(2020: R18.3 billion)
R10.4 billion net debt
(2020: R14.1 billion)
R6.6 billion undrawn facilities
(2020: R6.3 billion)
INTELLECTUAL CAPITAL
We differentiate ourselves through excellent service offerings, responsible corporate governance and adherence to quality standards – the intangibles of our business that contribute to our competitive advantage.
Global healthcare provider delivering high quality care
Robust governance framework
Novel radiotracers within LMI, including FDA approved NeuraCeq®
HUMAN CAPITAL
We depend on the skills, knowledge and experience of our employees to implement our strategy. By delivering our products and services, our employees attend to our patients’ needs, thereby creating sustainable value for our stakeholders.
Diverse Board and experienced leadership team
Fair and transparent remuneration
19 535 employees (2020: 18 923)
R158 million invested in training (2020: 224 million)
SOCIAL AND RELATIONSHIP CAPITAL
Creating and nurturing long-term relationships with our key stakeholders – including doctors, patients, suppliers, business partners, governments and labour unions – is how we build our reputation and brand, which is essential to our success.
22 COVID-19 vaccination sites
Nurturing stakeholder relations
Public-private partnerships with governments in South Africa, UK and Europe
R92 million (2020: R65 million) community upliftment investment in South Africa
MANUFACTURED CAPITAL
Our clinical excellence is supported by our technologically advanced and multi-disciplinary facilities, optimal infrastructure, data and analytics capabilities, and world-class medical equipment and consumables.
R14.7 billion in property, plant and equipment (PPE) (2020: R15.4 billion)
R1.5 billion in maintenance capital expenditure (capex) (2020: R1.2 billion)
R0.4 billion growth capex (2020: R0.8 billion)
NATURAL CAPITAL
We make use of both renewable and non-renewable natural resources in the delivery of services to our patients. While our business has an unavoidable impact on the environment, we endeavour to reduce negative impacts by measuring and managing our activities.
Solar panels at 15 facilities (2020: 12) which
generated 7.8 gWh of power
1.1 million kl water consumed (2020: 1.0 million kl)
150 gWh grid-tied electricity purchased (2020: 156 gWh)
Business activities and outputs
Our healthcare and operational activities enable us to deliver world-class outputs in southern Africa and internationally. Our unique international diversified healthcare service offering is summarised below (please note that the segment sizes are illustrative and not proportional to revenue contribution).
Value creation key:
Value created
Value preserved
Value erodedOur inputs, business activities and outputs culminate in outcomes for our stakeholders. These outcomes either create, preserve or erode value resulting in capital trade-offs.
Outcomes
Creating value for our stakeholders and managing trade-offs
Stakeholders impacted
Trade-offs
FINANCIAL CAPITAL
R5.1 billion normalised* EBITDA (2020: R4.2 billion)
R1.9 billion net profit after tax (2020: R38 million)
25 cents dividend declared (2020: zero cents)
Improved performance and cost savings resulted in
improved cash generation
Normalised* earnings per share (NEPS) of 112.7 cps (2020: 61 cps)
Share price 2 279 cents up 33.6% year-on-year at 30 September 2021
(versus same date in 2020) (2020: 1 706 cents)
Shareholders received a final dividend of 25 cents per share (2020: zero cents), which
negatively impacted financial capital (cash outflow) but positively impacted social and
relationship capital (shareholders). Disposal of Scanmed generated net proceeds of
R681 million which improved our financial capital (cash inflow).
INTELLECTUAL CAPITAL
Improvement in profit margins during 2021
High clinical quality metrics maintained
Growth opportunity for NeuraCeq® following FDA approval
of Biogen’s Alzheimer’s drug Aduhelm®
Enhanced pricing models (alternative reimbursement models)
with medical schemes in South Africa, including development
of value-based care products
Further developments around new disease modifying drugs for Alzheimer’s disease
positively impacted our intellectual capital. Our strategy to implement digitally enabled
value-based care over time will negatively impact financial capital but positively impact
intellectual and social and relationship capital (patients, employees, doctors and specialists).
HUMAN CAPITAL
R7.2 billion in employee salaries (2020: R8.7 billion)
645 nurses trained through a Life Healthcare Nursing College (2020: 855)
81.4% female employees in South Africa (2020: 79.6%)
29 employees succumbed to COVID-19
(2020: 19) and
c.2 900 employees contracted COVID-19 (2020: c.2 700)
The loss of 48 employee lives from COVID-19 and c.5 600 employees who contracted
COVID-19 impacted negatively on human capital as employee morale was impacted.
High employee turnover and increased use of agency employees negatively impacted
financial capital.
SOCIAL AND RELATIONSHIP CAPITAL
c.80% of healthcare employees vaccinated in South Africa against
COVID-19
Level 3 B-BBEE rating (2020: Level 4)
99% of procurement spent with local suppliers (2020: 96%)
c.380 000 vaccinations done at 22 Life Healthcare facilities to date in 2021
Good progress with employee vaccinations positively impacted human (employees)
and social (patients, doctors and specialists) capitals but assistance with national
vaccination roll-out negatively impacted financial capital from a cost perspective.
Increased preferential procurement spend supported social and relationship capital (suppliers).
MANUFACTURED
CAPITAL
c.365 000 COVID-19 patient days within our facilities
16 beds, 65 renal dialysis stations added
1 cyclotron acquired
58.6% occupancy rate in our acute and complementary services
division in 2021 (2020: 58.0%)
Capital expenditure during 2021 positively impacted our manufactured capital however
this negatively impacted our financial capital (cash outflow).
NATURAL
CAPITAL
1.1 million kl water consumed (2020: 1.0 million kl)
150 gWh grid-tied electricity purchased
(2020: 156 gWh)
1.7 million tons of waste recycled (2020: not available)
2.87 kg/PPD of healthcare risk waste generated (2020: 2.01) A
7 800 tons of CO2 emissions prevented by energy from solar panels
Due to intermittent electricity blackouts our diesel consumption increased which
negatively impacted on our natural and financial capitals. The COVID-19 waves put
strain on our employees and continued to put pressure on profit margins impacting both
human and financial capitals.
* Normalised EBITDA and NEPS exclude non-trading related costs or income and are non-IFRS measures.