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'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
Source: JSE News Service (SENS)
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