Our opinion on the current state of LIFEHC(LHC)Life Healthcare (LHC) is the second-largest JSE-listed healthcare company, operating private hospitals, same-day clinics, and healthcare services in South Africa, the UK (through Alliance Medical), and Western Europe. The outgoing CEO, Shrey Viranna, highlighted the group's strategic shift towards day-clinics and non-acute services, along with a focus on self-pay patients rather than solely relying on medical aid schemes. This is evident from their launch of MyLife Clinic, which offers consultations and basic medication for R300.
In its results for the year ending 30th September 2023, the company reported revenue growth of 10.3%, although headline earnings per share (HEPS) fell by 16.9%. The company attributed strong demand in its South African operations to being a preferred provider for medical aids, resulting in a 9.5% growth in paid patient days (PPD).
For the six months ending 31st March 2024, the company projected earnings per share to increase by over 20% due to the sale of Alliance Medical Group, although this did not impact HEPS. The half-year results showed revenue growth of 7.8% and a 2.3% increase in PPD for acute services. HEPS from continuing operations rose by 29.9%. The company also noted a strong financial position with net debt reduced to a ratio of 0.8 times normalised EBITDA after paying a special dividend in April 2024.
In an update for the full year to 30th September 2024, Life Healthcare reported revenue growth of between 12% and 13%, with PPD increasing by 1.6%. The company estimated that HEPS from continuing operations would rise by 55.9% to 60.9%. It highlighted significant debt repayment and a reduction in interest costs by approximately 66% due to positive cash flow from the sale of Alliance Medical.
Technically, the share peaked at R47 in September 2014 but entered a long downward trend. It is currently trading around 1700c with a price-to-earnings (P:E) ratio of 20.74. This valuation reflects the company's defensive nature, expected financial improvements, and its overseas diversification, which provides some rand-hedge benefits. Although the share has not yet broken through its long-term downward trendline, it appears to offer reasonable value, especially as dividends have resumed.
