Life Healthcare nurses Covid-19 hangover

Life Healthcare SENS statement:

Voluntary trading update for the period 1 October 2020 to 31 December 2020

Group financial performance and balance sheet update

The Group’s trading for the Q1 FY2021 period (1 October 2020 to 31 December 2020) exceeded expectations, growing revenue by approximately 5% on a like-for-like basis compared with Q1 FY2020 and approximately 4% over Q4 FY2020 (1 July 2020 to 30 September 2020). Group normalised EBITDA continues to be impacted by the higher operational costs associated with COVID-19 resulting in normalised EBITDA decreasing by approximately 15% against Q1 FY2020. Group normalised EBITDA for Q1 FY2021 was approximately 32% better than Q4 FY2020 given imp roving activity across the Group in October and November.

The Group’s net debt remains similar to that at 30 September 2020 and the net debt to normalised EBITDA ratio remains well within the Group’s banking covenants. In addition, the Group continues to have sufficient banking facilities available. The currently available but unutilised facilities remain similar to the R6.3bn reported at September 2020.

The Group has concluded the disposal of Scanmed in Poland although completion of the disposal process remains contingent on final regulatory approvals. We expect the disposal process to be finalised by the end of Q2 FY2021.

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Southern African operations

Activities for Q1 FY2021 have been impacted by the second COVID-19 wave but showed good improvement on Q3 and Q4 FY2020. COVID-19 only started to impact the Group’s southern African operations during March 2020, and hence the Q1 FY2020 period was not affected by COVID-19.

Paid Patient Days (“PPDs”) continued to increase with occupancies for October 2020 and November 2020 increasing to 58% and 60% respectively from 53% in September 2020. This was primarily driven by an increase in elective surgical cases. Theatre minutes for October 2020 and November 2020 were c.90% of prior year and up c.10% on September 2020 theatre minutes. Occupancies were negatively impacted by the slow return of medical cases over this period.

December 2020 activities were impacted by the second COVID-19 wave with hospitals restricting and then voluntarily stopping elective surgeries to cope with the increasing number of COVID-19 patients. Occupancies for December 2020, which is traditionally a quiet period, were 55.2% (54.8% in December 2019) driven by the increased COVID-19 admissions.

Revenue growth in the southern Africa operations was approximately 1% below Q1 FY2020 and 6% above Q4 FY2020. The increase in revenue was driven by the increase in elective cases in October and November 2020, the increase in COVID-19 admissions in December 2020 and a higher revenue per PPD due to the continued change in underlying case mix.

The increase in underlying activities and more efficient management of underlying costs within the COVID-19 environment resulted in normalised EBITDA increasing by approximately 78% on Q4 FY2020. However, the higher operating costs associated with treating COVID-19 patients as well as the lower occupancies compared to prior year continue to have a negative impact on normalised EBITDA with normalised EBITDA decreasing by approximately 34% against Q1 FY2020.

International operations

The International operations (excluding the Polish operations which are now classified as discontinued operations) had a strong Q1 FY2021 with revenue up approximately 13% (in GBP) versus Q1 FY2020, and up approximately 6% versus Q4 FY2020. Normalised EBITDA was up by approximately 37% (in GBP) versus Q1 FY2020 and up approximately 1% versus Q4 FY2020.

While the impact of COVID-19 on the Group’s International operations was felt earlier in FY2020 than the southern African operations, this impact only started after the Q1 FY2020 period.

Total scan volumes in our International operations improved by approximately 4% versus Q1 FY2020 and by 3% versus Q4 FY2020. PET CT volumes in the UK increased by approximately 7% versus Q1 FY2020 and by 6% versus Q4 FY2020.

This strong performance was driven by a number of factors during the period including:

• increased scan volumes compared with the prior year which can be attributed to some catchup of backlogs which developed during initial COVID-19 lock-downs in Q2 and Q3 FY2020;

• increased utilisation and reduced costs following the maintenance downtime and expenditure on our cyclotrons in FY2020; and

• additional income streams resulting from COVID-19 initiatives, including blood tests in Italy and timely mobilisation of additional mobile CT services across Europe (many of which are likely to be temporary in duration).

COVID-19 Second Wave update

The emergence of a second wave of COVID-19 infections, around the world continues to pose a significant challenge to the Group. Our International operations were affected first and by the end of 2020 there were already stringent lockdowns in many of the territories in which our International business operates. While these restrictions have limited the movement of people around Europe, the demand for our scanning services has remained strong.

In our southern African operations the second wave emerged later in 2020, thus the impact of the second wave on the southern African operations was only experienced towards the end of the quarter and has continued into Q2 FY2021.

To date over 23,000 COVID-19 patients have been admitted into our facilities with higher volumes of COVID-19 patients compared to wave 1.

The Group applied the detailed learnings from the first COVID-19 wave not only to the medical treatment of patients in the second wave but also to the speed of internal decision making, detailed cost management and the continued cash preservation programme initiated during FY2020.

Life Healthcare continues to provide support to Governments in the countries of its operations. Life Healthcare has always been available and willing to assist in treating public patients during the pandemic, but to date has only admitted c.20 public patients across the Group’s hospital network. In the UK, Alliance Medical has provided 16 Mobile CT Scanners to support the NHS’s response to COVID-19.

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Group COVID-19 vaccination update

The Group set up a Life Healthcare Vaccine Task Team, that has delivered a detailed operational plan for the vaccination of our staff, doctors, allied healthcare workers and other key individuals, within the South African operations in anticipation of the arrival of vaccines. The Vaccine Task Team will continue to work in close cooperation with all necessary external parties, stakeholders and authorities.

With the approval and roll out of a country-wide vaccination programme within the United Kingdom and Europe, we are pleased to announce that to date over 450 (c25%) of our staff within Alliance Medical have received their first COVID-19 vaccine dose.