Life Healthcare FY22 – In SA hospitals and emergency services LHC trusts

The first half of FY22 set the scene for Life Healthcare’s performance. Hospitals and complementary services revenue and profitability performance supported the group during FY22. The division’s paid patient days (PPDs) have expanded faster in the two years since FY20 (3% CAGR) than in the two years to FY19 (1% CAGR), and continue to generate good revenue per PPDs. We estimate that, on average, LHC generated R9 227 per hospital and complementary services patient day. Additionally, Life Nkanyisa’s stable PPDs and occupancy rates are supporting Healthcare services’ sales generation and profitability, post the loss of the Covid-related Life Employee Health Solution (LHS) contracts.

Ireland and Italy continue to drive Alliance Medical’s diagnostic imaging volumes and revenue, on the back of efforts by the countries’ national health services to reduce their diagnostic waiting lists. The PET/CT scan volumes in the UK, which accounted for at least 90% of AMG’s molecular imaging volumes since acquisition, also maintained strong growth during FY22 (15% CAGR since FY20 compared to 7% CAGR in two years to FY19).

We believe Hospitals and complementary services’ PPDs will exceed pre-pandemic levels in the next financial year, supported by increasing occupancy rates and normalising case mix. Until substantial LHS contracts are signed, Healthcare services’ revenue growth will remain constrained in the short term as indication from management is that the LHS market is competitive. While scan volumes will increase in AMG’s main operating regions, the UK’s diagnostic volumes growth will remain muted. Inflation headwinds in the UK and the eurozone, and additional staffing requirements for UK’s community diagnostics centres will put further pressure on AMG’s margins.