Life Healthcare shareholders eye R8.4bn AMG bonanza

Life Healthcare shareholders could be in for an R8.4 billion payout bonanza if the group’s proposed R21 billion sale of its Alliance Medical Group (AMG) business in the UK gets the green light.

This is revealed in the group’s latest results for the full-year to the end of September 2023, released on Thursday.

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“As previously communicated to the market, Life Healthcare Group has signed an agreement to sell its AMG diagnostic imaging business to iCON Infrastructure in a deal that will earn the group around R10.8 billion in net proceeds, pending approval from shareholders and regulators,” said in a results statement.

“Of this windfall, the group plans to return around R8.4 billion to shareholders as special dividends and/or share buybacks, and to reserve R2.4 billion for future growth initiatives,” the JSE-listed private hospital and healthcare group added.

The announcement of the proposed special payment comes as the group also reported in its latest results that it has taken a R971 million hit from the up-for-sale UK business.

Approvals

The planned sale, announced just last month post its year-end and valued at around R21 billion, is subject to conditions, including a shareholder vote on 8 December. If given the go-ahead, shareholders are expected to receive a bonanza distribution of around R8.4 billion (most likely next year).

“The group’s overall earnings from continuing and discontinued operations have been impacted by higher interest costs, given the significant interest rate increases experienced in both SA and internationally, and by a number of non-trading items including a R971 million loss [impairment and transaction costs] relating to the proposed disposal of AMG,” Life Healthcare said in its results Sens statement.

Other non-trading items that impacted its financials included:

• A R152 million net positive impact compared to last year due to the settlement of a Sars (SA Revenue Service) VAT matter, which it disclosed in FY2022 and its results for the six months to 31 March 2023 (H1-2023)
• A R34 million impairment in the UK (as disclosed in our H1-2023 results)
• The prior year positively impacted by the release of the Life Molecular Imaging (LMI) contingent consideration of R437 million.

The group pointed out in its latest results that due to the proposed AMG transaction, the UK company has been “disclosed as a discontinued operation” and thus is not included in the results of the continuing operations for the twelve months to September 2023, nor those of the twelve months to September 2022.

Life Healthcare reported that group revenue from continuing operations grew 10.3% to R22.6 billion (FY2022: R20.5 billion) and normalised EBITDA from continuing operations grew 4.4% to R3.6 billion (FY2022: R3.4 billion). Normalised earnings per share (Neps) from continuing operations grew 11.4% to 89.1 cents.

However, when looking at the headline earnings per share (Heps) from continuing and discontinued operations perspective, Heps declined by 16.9% to 88.2c compared to 106.1c in FY 2022.

The group noted that Neps from continuing and discontinued operations – excluding non-trading related items – decreased by 1.9% to 94.6c (FY2022: 96.4c).

The group nevertheless said that it had “delivered a strong operating performance” for the full-year to the end of September 2023.

Life Healthcare’s board approved a final gross cash dividend of 27 cents per ordinary share, which is declared from income reserves. This brings the total dividend declared for FY2023 to 44 cents per share (FY2022: 40cps), which is 10% up on the prior financial year.