LHC: LIFE HEALTHCARE GROUP HOLDINGS LIMITED - Trading statement and publication of supplementary rights offer circular

2017-04-05 07:30:00
LHC: LIFE HEALTHCARE GROUP HOLDINGS LIMITED - Trading statement and publication of supplementary rights offer circular
Trading statement and publication of supplementary rights offer circular
LIFE HEALTHCARE GROUP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2003/002733/06)
ISIN: ZAE000145892
Share Code: LHC
("Life Healthcare" or "the Company")
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN
OR INTO CANADA, AUSTRALIA AND JAPAN. THIS ANNOUNCEMENT DOES NOT
CONSTITUTE OR FORM AN OFFER OF SECURITIES IN THE UNITED STATES OR ANY
OTHER JURISDICTION.
TRADING STATEMENT AND PUBLICATION OF SUPPLEMENTARY RIGHTS OFFER
CIRCULAR
1. Introduction
Life Healthcare´s strategic objective is to establish a sizeable international business and to
accelerate the transition from a South African focused acute care group to an international,
diversified healthcare provider. Life Healthcare´s international expansion strategy has been
focused on selected attractive markets that display supportive characteristics for the longer-
term growth of the private healthcare market.
In line with this strategy, Life Healthcare completed the acquisition of Alliance Medical Group
Limited ("Alliance Medical") in November 2016. Alliance Medical is one of Europe´s leading
providers of complex molecular and diagnostic imaging services, with operations in the United
Kingdom, Italy, Ireland, Spain, the Netherlands, Germany, Finland, Bulgaria, France and
Norway.
This acquisition establishes Life Healthcare as an international healthcare provider with
diversified healthcare businesses and a geographically diversified revenue stream.
International revenue and Normalised EBITDA as a percentage of total revenue and
Normalised EBITDA are estimated to change as follows:
                                  Six months ended 31 March         Six months ended 31
                                  2017                              March 2016
  Revenue                         18% - 24%                         7%
  Normalised EBITDA               16% - 20%                         4%
Normalised EBITDA is defined as operating profit before depreciation on property, plant and
equipment and amortisation of intangible assets and non-trading related costs and income.
Life Healthcare sees the entry into diagnostics as a natural part of its growth and diversification
strategy which, over the past few years, has included the expansion of services into mental
health, acute physical rehabilitation, renal dialysis and oncology.
2. Trading statement
Shareholders are referred to the announcements issued by the Company on the Stock
Exchange News Service ("SENS") on 23 March 2017 and 28 March 2017 relating to the rights
offer and the Company´s current trading.
Pursuant to these announcements shareholders are advised that although the interim results
for the six months ended 31 March 2017 are not yet finalised, the Company´s revenue,
Normalised EBITDA, earnings per share and headline earnings per share for the six months
ended, 31 March 2017 are expected to vary from those reported in the comparative period,
the six months ended 31 March 2016, within the following estimated ranges:
Measure                      Estimated range       Estimated six months       Six months    Note
                                                   ended 31 March 2017        ended    31
                                                                              March 2016
Revenue                      +20% to +25%          R9 432m to R9 825m         R7 860m       1
Normalised EBITDA            +11% to +15%          R2 330m to R2 414m         R2 099m       2
EBITDA                        0% to +3%            R2 154m to R2 219m         R2 154m       3
Earnings per share           -60% to -70%          37.2 to 27.9               93.0          4
(cents)
Headline Earnings per        -50% to -60%          46.5 to 37.2               93.0          4,5
share (cents)
Notes:
   1. Revenue for the six months ended 31 March 2017 is estimated to increase by between
      20% and 25% over the comparable period in 2016, primarily due to the inclusion of the
      results of Alliance Medical with effect from 21 November 2016. Alliance Medical is
      estimated to increase its revenue by between 5.5% and 6.0% over the comparable
      period in 2016.
       Revenue from the Southern African operations is estimated to increase by between
       3.5% and 5.5% over the comparable period in 2016. Revenue was negatively impacted
       by the lower volumes in the hospital division in paid patient days ("PPDs") of between
       0.9% and 1.2% below last year. These activity numbers are an improvement on the
       PPDs as of the end of February as a result of better trading in March as well as Easter
       being in April in 2017 as opposed to March in 2016. Overall lower volumes have been
       due to limited or no growth in the private healthcare market, a greater than expected
       slowdown in the South African economy, an increase in active case management by
       medical aids away from hospital admissions and doctors going on holiday for longer
       periods and more frequently than anticipated. The result of the lower PPD volumes
       caused the weighted occupancy levels to reduce from 69.9% in the comparable period
       to an estimated level of between 68% and 69%. The number of beds in operation has
       increased from 8 557 as at 31 March 2016 to 8 702 as at 31 March 2017. Despite the
       lower trading in the Southern Africa Hospitals division, the Healthcare Services division
       continues to show good growth with revenue increasing by between 20% and 24%.
   2. Normalised EBITDA is the primary measure the Life Healthcare Group uses to assess
      underlying financial performance.
      The impact of the Alliance Medical acquisition and the trading of Southern Africa and
      Poland is estimated to result in an increase in Normalised EBITDA for the six months
      ended 31 March 2017 of between 11% and 15% compared to the comparable period
      in 2016.
      Normalised EBITDA for the Southern Africa operations is estimated to be 2.5% to
      3.5% below the comparable period, primarily due to the lower trading in the
      Southern Africa operations and the impact of the loss of the Gauteng Mental Health
      contract in the Healthcare Services division in July 2016.
      The Polish operations performed to expectations but Normalised EBITDA will be
      significantly below last year. This is due to the impact of the reduction in tariffs as
      promulgated in Poland effective 1 July 2016 and further cardiology tariff reductions
      from 1 January 2017.
      Alliance Medical has performed to Life Healthcare´s expectations. The business
      has performed well against the comparative period with Normalised EBITDA
      expected to be higher on a constant currency basis.
   3. EBITDA is operating profit before depreciation on property, plant and equipment and amortisation
      of intangible assets.
   4. Earnings per share ("EPS") and headline earnings per share ("HEPS") are expected
      to be below the comparative period last year primarily due to the impact of the
      acquisition of Alliance Medical and once-off items related to the investment in Poland.
      Max Healthcare has performed well at an operational level but the earnings from this
      business were impacted by the monetisation of the currency and the costs associated
      with growing the business.
      The impact of the once-off non-trading related items are:
      Relating to the Alliance Medical acquisition:
      - Transaction costs relating to the acquisition are estimated to be between R240m
        - R260m (resulting in a decrease in EPS and HEPS of between 22.7 and 24.6
        cents per share). All transaction costs relating to the rights offer have been
        capitalised;
      - Interest costs related to the acquisition funding are estimated to be between
        R370m - R390m for the period (resulting in a decrease in EPS and HEPS of
        between 35.1 and 37.0 cents per share). Debt funding of approximately R9 billion
        will be repaid by the equity raised through the rights offer and will reduce the
        interest cost correspondingly for the second half of the financial year;
      - Reversal of the contingent consideration related to the acquisition of Alliance
        Medical is estimated to be between R180m - R220m (resulting in an increase in
        EPS and HEPS of between 17.1 and 20.9 cents per share);
      Relating to the Poland investment:
      - A further impairment required in Poland of up to R150m as a result of the additional
        reduction in tariffs in cardiology from 1 January 2017 (resulting in a decrease in
        EPS of 14.2 cents per share but no impact on HEPS); and
      - The one-off release of contingent consideration relating to the Polish business in
        the six months ended 31 March 2016 that has not reoccurred during the six months
        ended 31 March 2017.
   5. Life Healthcare defines headline earnings per share in accordance with the SAICA
      Circular 2/2015, as headline earnings, which consists of profit after tax attributable to
      ordinary equity holders, adjusted for impairment of investment, loss on remeasuring
      previously held interest in associate to fair value, profit on disposal of investment in
      associate and other re-measurement items (all net of related tax and non-controlling
      interests), divided by the weighted average number of ordinary shares in issue during
      the period.
       
      Headline earnings per share accordingly excludes the impact of the impairment in
      Poland.
The Company is in the process of finalising its results for the six months ended 31 March 2017
and the above results are based on preliminary information, which remains subject to the
completion of financial closing procedures. The final interim financial results may differ from
the above.
The trading statement above has been prepared by, and is the responsibility of, Life
Healthcare´s management. PricewaterhouseCoopers has not audited, reviewed, compiled or
performed any procedures with the respect to the information contained in this announcement.
Accordingly, PricewaterhouseCoopers does not express an opinion or any other form of
assurance with respect thereto.
The Company´s interim financial results for the six-months ended 31 March 2017 will be
released on SENS on or about 12 May 2017.
3. Supplementary rights offer circular
In light of the additional information provided in the trading statement above, Life Healthcare
has prepared a supplementary rights offer circular dated 4 April 2017 (the "Supplementary
Circular"). Qualifying shareholders are hereby requested to review the Supplementary
Circular, which has been published on the Company´s website (www.lifehealthcare.co.za)
and will be posted, where applicable, to qualifying shareholders today, 5 April
2017.
The Supplementary Circular contains important information concerning the rights offer, as set
out in this announcement. The Supplementary Circular supplements the information contained
in the rights offer circular dated 28 March 2017 (the "Circular") and is intended to be read
together with the Circular. Other than the update set out in the Supplementary Circular, all
other details in relation to the Circular remain unchanged.
PricewaterhouseCoopers has not audited, reviewed, compiled or performed any procedures
with the respect to the information contained in the Supplementary Circular. Accordingly,
PricewaterhouseCoopers does not express an opinion or any other form of assurance with
respect thereto.
Illovo
5 April 2017
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Important Notice
The information contained herein is not for release, publication or distribution, directly or
indirectly, in or into Canada, Australia or Japan or any other jurisdiction in which the distribution
or release would be unlawful. These materials are not and do not contain an offer of securities
for sale or a solicitation of an offer to purchase or subscribe for securities in any jurisdiction,
including the United States, Australia, Canada or Japan or any other state or jurisdiction in
which such release, publication or distribution would be unlawful. The securities to which these
materials relate (the "Securities") have not been, and will not be, registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in
the United States unless registered under the Securities Act or pursuant to an exemption from,
or in a transaction not subject to, registration under the Securities Act. There will be no public
offer of the Securities in the United States. Subject to certain exceptions, the Securities may
not be offered or sold in the United States, Australia, Canada or Japan or to, or for the account
or benefit of, any national, resident or citizen of such countries.
These materials are only being distributed to and are only directed at: (i) persons who are
outside the United Kingdom; or (ii) to investment professionals falling within Article 19(5) of
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order");
or (iii) high net worth entities, and other persons to whom it may lawfully be communicated,
falling within Article 49(2) of the Order; or (iv) persons to whom an invitation or inducement to
engage in investment activity (within the meaning of section 21 of the Financial Services and
Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully
be communicated; or (v) persons to whom it may otherwise lawfully be communicated (all
such persons together being referred to as "relevant persons"). The Securities are only
available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire
such securities will be engaged in only with, relevant persons. Any person who is not a relevant
person should not act or rely on this announcement or any of its contents.
In any member state of the European Economic Area (other than the United Kingdom) that
has implemented Directive 2003/71/EC (and amendments thereto, including Directive
2010/73/EU to the extent implemented in the relevant Member State, together with any
applicable implementing measures in any Member State, the "Prospectus Directive") this
announcement is only addressed to and is only directed at qualified investors in that Member
State within the meaning of the Prospectus Directive.
These materials do not constitute or form a part of any offer or solicitation or advertisement to
purchase and/or subscribe for Securities in South Africa, including an offer to the public for
the sale of, or subscription for, or the solicitation or advertisement of an offer to buy and/or
subscribe for, shares as defined in the South African Companies Act, No. 71 of 2008 (as
amended) or otherwise (the "Act") and will not be distributed to any person in South Africa in
any manner that could be construed as an offer to the public in terms of the Act. These
materials do not constitute a prospectus registered and/or issued in terms of the Act. Nothing
in this announcement should be viewed, or construed, as "advice", as that term is used in the
South African Financial Markets Act, No. 19 of 2012, as amended, and/or Financial Advisory
and Intermediary Services Act, No. 37 of 2002, as amended.
The contents of this announcement have not been verified by the banks engaged to underwrite
the offering (the "Banks"). The Banks are each acting exclusively for Life Healthcare and for
no-one else in connection with any transaction mentioned in these materials and will not
regard any other person (whether or not a recipient of this announcement) as a client in
relation to any such transaction and will not be responsible to any other person for providing
the protections afforded to their respective clients, or for advising any such person on the
contents of these materials or in connection with any transaction referred to in this
announcement.
No reliance may be placed for any purposes whatsoever on the information contained in this
announcement or on its accuracy or completeness. No representation or warranty, expressed
or implied, is given by or on behalf of Life Healthcare, the Banks or their respective affiliates,
directors, officers or employees, advisors or any other person as to the accuracy or
completeness of the information or opinions contained in this announcement, and no liability
whatsoever is accepted for any such information or opinions or any use which may be made
of them.
Persons receiving this announcement should make all trading and investment decisions in
reliance on their own judgement and not in reliance on the Banks or this document. None of
the Banks is providing any such persons with advice on the suitability of the matters set out in
this announcement or otherwise providing them with any investment advice or personal
recommendations. Any presentations, research or other information communicated or
otherwise made available in this document is incidental to the provision of services by the
Banks to Life Healthcare and is not based on individual circumstances.
All investment is subject to risk. The value of the securities offered may go down as well as
up. Past performance is no guarantee of future returns. Potential investors are advised to seek
expert financial advice before making any investment decision.
Forward-Looking Statements
This announcement includes certain forward-looking statements, beliefs or opinions, including
statements with respect to Life Healthcare´s business, financial condition, results of operations
and prospects. Forward-looking statements are typically identified by the use of forward
looking terminology such as "will", "expected", "estimated" or "should". These statements
reflect the directors' beliefs and expectations and involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future. No representation
is made that any of these statements or forecasts will come to pass or that any forecast results
will be achieved. There are a number of risks, uncertainties and factors that could cause actual
results and developments to differ materially from those expressed or implied by these
statements and forecasts. Past performance cannot be relied on as a guide to future
performance. Forward-looking statements speak only as at the date of this announcement,
and Life Healthcare expressly disclaims any obligations or undertaking to release any update
of, or revisions to, any forward-looking statements in this announcement. No statement in this
announcement is intended to be a profit forecast. As a result, you are cautioned not to place
any undue reliance on such forward-looking statements. Please refer to the Life Healthcare´s
Integrated Report for the financial year ended 30 September 2016 for a description of certain
important factors, risks and uncertainties that may affect Life Healthcare´s businesses.
Date: 05/04/2017 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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