JSE-listed healthcare provider Life Healthcare Group’s share price surged around 13% on Wednesday, after it notified the market in a Sens that it is open to discussions started by third parties looking to acquire its European diagnostic and molecular imaging business AMG.
Life Healthcare confirmed it has been on the receiving end of several unsolicited proposals from third parties to acquire the group’s interests in the business.
The announcement saw a double-digit surge in its share price, which topped the R19-a-share mark for the first time this year. Its share price last traded at this level in November last year.
Life Healthcare noted that its AMG operations remain a core part of the group. However, the company says that it is considering its options regarding the offers for this business. As a result, it has appointed Barclays and Goldman Sachs as advisors to assist in evaluating the proposals.
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“The board, the group executive and AMG management remain confident in AMG, its prospects and the future potential of the current strategy to deliver value for the company’s shareholders,” the group said.
“Notwithstanding that AMG remains core to the group, the board is of the view that it has an obligation to evaluate the proposals received and assess the implications thereof in the context of the group’s strategy.”
“Shareholders are advised that the board’s consideration of the proposals is at an early stage and that no decisions have been taken, other than to undertake this initial assessment. In the interim, the AMG management team will remain focused on executing its strategy,” Life Healthcare added.
Meanwhile, in a trading update included in the Sens statement, the group noted that the four months to 31 January 2023 saw “solid underlying operational performance across all its markets”, as patients mark their return to facilities and bump up occupancy levels.
Life Healthcare’s Southern African operations have seen a 62% increase in overall occupancies compared with the prior year, boosted by a 14% increase in admissions, as well as a 13% rise in overall paid patient days during the period.
As a result, the group reported that revenue for the region increased by 11% in the first four months, with Ebitda (earnings before interest, taxes, depreciation and amortisation) margins strengthening and Ebitda increasing by 16%.
Like many other businesses operating within South Africa’s borders, Life Healthcare has reported an uptick in operational costs linked to load shedding.
According to the group, its diesel bill has increased from R5 million in the prior quarter to R25 million for the latest four-month period.
Although the increase is significant, the group says its decision to invest in backup power in previous years means that it now suffers minimal operational disruptions as a result of the power cuts.
On its international business, the group reported a 9.2% rise in revenue, supported by the completion of the new Taunton Diagnostic Centre and Oldham Northern Care Alliance CDC (both in the UK).
“The current inflationary environment continues to place pressure on costs,” the group said, speaking to its international operations.
“Good scan volume growth, pricing reviews (both contractual inflationary increases and variable pricing models) and further detailed cost constraint plans will offset some of the cost pressures,” it added.
Listen to Life Healthcare CEO Peter Wharton-Hood speaking to Fifi Peters about the group’s last full-year performance (or read the transcript):