Life โขHealthcare Shares Dip Following R2.9bn Piramal Liability Adjustment
Life Healthcare experienced a significant drop in share price, falling asโ much as 9% inโข earlyโ Wednesday โtrading,โค triggered by a R2.9 billion adjustment toโ its liability related to the sale of โLife Molecular Imaging (LMI).
The Piramal liability โstems fromโ an agreement tied to potential earnout payments of up to $400 million (approximately R6.87 โbillion) contingent onโค future salesโ performance of LMI products until 2034. Life โขHealthcareโ sold LMI to Lantheusโ earlier this year. This adjustment resulted in โขa roughly 201 โคcents per share reduction in earnings.
Beyond the Piramal adjustment, the group’s financial performance was also impacted by lower contributions from its recently acquired renal dialysis business (formerly Fresenius Medical Care) and broader inflationary pressures.
Life Healthcareโ acknowledged that comparing financial results year-over-year is complex dueโ to the disposals of both LMI this year and the Alliance Medical Group (AMG) in the prior year.
Despite these challenges, the companyโ anticipatesโข normalised earnings per share (NEPS) – excluding non-trading items – to increase by 7%-12% to a range of 97.5c-102c for the year โending September. However,it forecasts a headline loss โขper share of โ91.7c-96.4c, a decline from the 93.4c โreported in the previous year.
While the majority of Lifeโ Healthcare’s facilitiesโ performed well,results were dampened by underperformance at a few โคlocations and the lower margin contribution from the renal dialysis acquisition.
Overall revenue grew by 5.5%-6.5%, drivenโ by โa 1.1% โฃincrease in paid patient days (PPDs) and a 5.1% โtariff increase. Complementary services โrevenue saw ample growth atโ 24.7%, boosted byโ recent acquisitions, with PPDs in this sectorโฃ increasing โฃby 3.1%. revenue from healthcare servicesโ businessesโ decreased by 7.5% following the loss of two government contracts โin the second โขhalf of theโ financial year.
Weighted average occupancy rose slightly to 69.7% from โฃ69% โthe previous year. Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 4.5%-5%, โor 6.6%-7.1% on a like-for-like basis, โขwith the acute โbusiness showing โmargin advancement. However, theโ renal dialysis acquisition and inflationary pressures limited overall EBITDA margin growth.
Life Healthcare returned R4.5 billionโข to shareholders following the LMI disposal and โisโ currently evaluating its asset portfolio as part of an ongoing optimisation plan.
The group will releaseโ its full annual resultsโข on November โ27th. As of 1:35pm on Wednesday, shares were trading down 7.42% at R11.10.