Life Healthcare Group Holdings Limited (LHC) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Life Healthcare Annual Results presentation. [Operator Instructions] Please note this event is being recorded. I'd now like to hand the conference over to the Group Chief Executive Officer, Mr. Peter Wharton-Hood. Please go ahead, sir.

Thank you very much, and welcome to you all to Life Healthcare's 2021 annual results. I'll get straight into the results presentation. I'm joined in the room by my colleagues who will unpack these details as we move forward. At a very high level, from a group perspective and excellent operating performance, Alliance Medical's revenue up 21%, EBITDA improvement by 41%, good performance in Southern Africa with a 10% improvement in revenue and an EBITDA increase of just over 12%. We reported earnings per share from continuing operations of just over ZAR 1.20 per share compared to a loss in the prior period. And this is clearly our business benefiting from a diversification strategy across geographies and business lines. We have declared a dividend of ZAR 0.25 per share. We have a strong balance sheet position where our normalized net debt to normalized EBITDA has now improved to a ratio of just over 1.82x. Next slide, please. If one has a look back at what our objectives for 2021 were, we wanted to restore the business to pre-COVID levels, and we've seen progress in higher margins across the group and an excellent cash generation performance at 113% of our normalized EBITDA. Quality care remains an imperative, and our quality metrics remain consistent with prior years and improved patient satisfaction scores despite the real challenges that COVID placed on our operations. We are the radiology partner of choice across the United Kingdom and Europe as a key partner to the public sector. And we won additional contracts and COVID-19 solutions within that sector quite convincingly. From an SA perspective, we said we'd enter the SA imaging market. We've made real progress both from an acquisitions perspective, collaboration discussions and the announcement of our joint venture with AXIM to deploy 2 cyclotrons in South Africa. An overall portfolio review took place, and we look to review and optimize our current asset portfolio. Scanmed was -- disposal was completed. Our MyLife centers and Life Employee Health Solutions absorbed into the continuing structure within South Africa. Next slide, please. We've made continued progress in our drive towards diversification. Revenue now internationally reported 29% of total; from a normalized EBITDA perspective, South Africa at 64%. And from an acute versus nonacute revenue perspective, we now have 65%-35%split. Next slide, please. We have a unique diversified offering. In describing our organization from a Southern African perspective, 66 health care facilities, 9,000 hospital beds, additional mental, rehabilitation beds to add to that, over 400 renal dialysis stations, 5 oncology centers and just over 3,000 beds in a public-private partnership. We are also the largest provider of employer-based on-site health care services. Complementing that internationally, we're the leading provider of imaging services to governments across United Kingdom, Italy and Ireland with more than 147 diagnostic imaging centers, 77 mobile diagnostic units, and we already own 11 radiopharmacy cyclotron sites. Added to that, we are also the largest vertically integrated PET-CT network in Europe. In all, a unique offering a diverse range of growth alternatives going forward. Next slide, please. Our environmental, social and governance journey remains an imperative, not only for making life better for our patients but all our stakeholders. And in this regard, I'm pleased to report that we have now received a AAA rating from the MSCI ESG rating, an improvement from our A rating in 2020. What I'd like to now do is hand over to Mark Chapman, who will unpack our international results. And then to Adam Pyle, who will look into the detail of our South African performance. Mark Chapman, over to you.

Thanks, Pete, and good morning, everybody. I'd like to go through the international operational review. But firstly, I'd like to thank every member of the team across all our countries and territories. We have delivered a very strong performance in 2021 across all parts of the business in which has been a very challenging yet rewarding year. So if we move on to Slide 10, the overall performance. You'll see it's been very strong revenue growth at 21%. This has gone into the EBITDA normalized value at 41% growth, delivering the absolute number of GBP 89 million. And I'm pleased to see the EBITDA margin has also grown from 20.8% to 24.2%. And we've seen this growth come from a number of areas. We've seen the resilience in the PET-CT scan volume activity in the U.K. We're seeing very strong growth across Ireland. We've also seen increased demand for CT imaging across all areas that we operate in. The mobile market in the U.K. has been strong, and this is outside of the CT contract across MRI as well. We've managed to stabilize the radiopharmacy business, which had its challenges in the prior year. With the opening of Dinnington, this has helped release some of that pressure. The EBITDA growth -- percentage growth has come from a number of areas. It has been supported in year by a number of initiatives to support national health providers across all territories, but we have stabilized the radiopharmacy as I explained with Dinnington coming onboard. And Dinnington has impacted and diluted the margin by 1%, but I'm sure you'll agree, overall, a very strong performance. I'll move on to the next slide, please. Many of you have seen this slide before, which just unpacks the territories and the size and the revenues. I think the main thing I'd like to just pull out of this slide will be the slight movement that we're seeing in the U.K. and Italy, where there's been a slight switch to increasing percentage points in the private sector of scanning. And I think that's evidence of the waiting list that we are seeing in the U.K. and Italy and some patients taking the decision to have the scan privately. In Ireland, a slight change to that where -- so it's been predominantly a self-pay and insured market, but we have seen the HSE, which I'll explain shortly, award a number of contracts for waiting lists about what they would normally do, again, highlighting the pressure in that health service in Ireland. If we move on to the next slide, please. Pleased to say, and you've heard me talk about this before, the diagnostics business has been resilient in COVID. In wave 1, it was [ a heavy ] effect on the recovery. But I'd like to draw your eyes to the charts to the right, and in H2, you can see that the PET volumes in molecular imaging have been ahead of pre-COVID activity numbers consistently and growing. And I'll come on to the growth shortly. But the diagnostic imaging, which is effectively the CT and the MRI, it's been around the pre-COVID levels, but again, very encouraging in the last few weeks. Activity has started to ramp up significantly. So the chart on the bottom, you can see Ireland actually from the beginning of the calendar year, growth to pre-COVID levels of activity and has had a steady growth thereon and again, growing on a nice trajectory. For Italy, it's been hovering around the pre-COVID levels. That dip in August is very seasonal and is expected in a normal year. And again, recovery is happening in Italy, but it has been supported by the additional COVID laboratory work for blood tests for COVID-19. Next slide, please. If you look at the molecular imaging, you can see the volume year-on-year has grown by 19%, very encouraging. Before COVID, it was tracking around 15%, 16%. So we are now seeing increased referrals coming through at a steady pace. I think it's worth noting that we don't effectively have a waiting list because we see a scan report back to our referrers within 7 days, and that's happening consistently above 90%. So when we see the patients, we scan them. And like I say, that growth has started to come through in a nice way. Just to recap the position, we are contracted for circa 70% of all PET-CT services in England, and that's made up of 2 large contracts. The first one we call wave 1, which, in fact, both of them have price assurity, wave 1 till 2025. And wave 2 is a 7 plus 3, and those contracts were awarded in 2019 and the last 1 in 2021. Next slide if we could. Unpacking the diagnostic imaging part of the U.K. business. Again, you saw that it was coming -- tracking at the pre-COVID levels and starting to increase nicely as an absolute like-and-like figure at 16%, which again is encouraging. That does include some of the COVID initiatives. But the strategy still remains in the U.K. to form long-term partnership solutions with hospitals and ICSs, integrated care systems. However, over the last 12 months, we have been reactive. We've addressed pace short-term opportunities whilst we've supported the NHS, as an example, to meet that pent-up demand. I think it's also worth noting that the 16 mobile CT under contract with NHS England has come to an end at the end of September. However, pleased to say that those services are now being awarded and procured to local trusts. So demand is still there for those CT mobiles. Next slide, please. Want to put this slide up just to try and highlight the pressure and the challenges that health systems have, certainly in the U.K. And there's always been a target to -- for U.K. to have your imaging services, diagnostics within 6 weeks. And it has been tracking at under 1% target. You can see when COVID has impacted, and it's the highest it's ever been for the NHS. You can see when it was a hard lockdown. [ It touched ] 50% of patients were beyond that 6 weeks. It's coming down, but it's still a significant challenge for the NHS. And this is where we are now talking to a number of trusts around community diagnostic centers, creating these public private partnerships, which is being encouraged and certainly in the Mike Richards report, which was commissioned by the NHS to support that. And we continue to be in talks with a number of trusts, and ICSs for these long-term partnerships. Next slide, please. It's a great example, and it's a real example. We're just in the final throes of contracting this out with a trust in the U.K. and we will -- AMG will invest in a new stand-alone diagnostic center in England. It will open up with 2 MRIs, 2 CTs and the PET-CT on day 1 with further expansion ability. And I think it will go to 9 scanners, this 1 facility. It is a long-term contract, as you'd expect, with our level of investment and also the trust, and that's over 10 years. And building and planning commences in the next couple of weeks, actually, with a completion early 2023. I think this just shows it's a very exciting time in the U.K. for the balance of the long-term stand-alone diagnostic centers. But this is nothing new to us. We have examples of this in Colchester. We have examples across Ireland. And indeed, if you look at some of our facilities in Italy, you'll see MRI, CT, PET-CT mammography, endoscopy to name but a few. Next slide, please. Looing in Italy. The Italian business has done well, revenues up 18.4%. It has been supplemented by some of the laboratory work. But overall, you can see the volume growth of 9.1%. And this is where there's been a relatively static ASL budget, which is the government provision. But that has, as I alluded to earlier, driven some of the private and the self-pay elements up. I think within Italy, it's good to say that the acquisitions in recent years are performing very well, and this will continue to be an area of focus for us, as [ Patricia ] and the team continue to consolidate the activities and ensure that the cost base is reduced effectively. Next slide, please. If you look at Ireland, Ireland has had a very, very strong year. Malcolm and the team have seen volume growth up 34.4%. And in recent weeks, they keep hitting a record weekly and daily activity numbers. This has been bolstered up by an increasing self-pay, but I've also alluded to the HSE contracts for the waiting list, which has also supported the growth in Ireland. If I look at Northern Europe and only focusing on the radiopharmacy part of that, with the cyclotrons, we've seen good growth year-on-year at 15% of doses being sold. And also, pleased to say that the cyclotron in Southern Germany, which was acquired during lockdown in January 2021 is performing very well and ahead of business pace. Next slide, please. Okay. Last but not least, we are a clinical business, and our outcomes and patient experience are at the forefront of everything we do. And you'll see here that our actuals are broadly ahead of target across the board. And again, this has been a challenging year for our staff when patient experience, long waiting lists from public services going to our facilities at the end, it doesn't just happen. So I'm very pleased to report a good set of quality outcomes as well and may that continue into the upcoming year. And I'd like to pause to as close now and pass you over to Adam to go through the South African business. Thank you.

Thank you, Mark, and good morning, everyone. So the South African business had a good overall performance for the last 12 months. And so what I'll do in these slides, I will briefly touch on COVID. I'll look at the numbers. I'll go through a segmental analysis before finally finishing with quality. But just before I start, I do want to thank all the Life Healthcare employees and doctors from Southern Africa in terms of both their contribution and their commitment over the last 12 months, which has been a very difficult and trying period. So I would like to start by thanking them. The next slide, which is Slide 21, shows the COVID impact on our business. And we know we've had 2 severe COVID waves over this period and each wave more intense than the previous wave. But these waves play out differently across the country, and they played out differently across the hospitals. So the graph on the left shows how our hospital PPDs for COVID play out across each province. And it is a reflection in terms of what experienced in each wave. So in wave 2, you'll see that our KwaZulu-Natal and Eastern Cape hospitals were severely impacted by COVID. Yet into wave 3, we found that Gauteng our other, which is really hospitals in the free state Northwest and Mpumalanga were severely impacted. And what's interesting in wave 3 was that our hospitals in KZN and the Eastern Cape, which are roughly 1/3 of our hospital beds, had a relatively benign COVID wave 3 with low COVID PPDs. And in fact, the COVID PPDs in wave 3 were half of their experience in wave 2. So it does show how the wave plays out differently across all our -- across the hospitals in the different regions. For H2 2021, our COVID PPDs as a percentage by total PPDs was 21%. [ And finally ] different than -- one aspect to note in terms of COVID wave 3 was the slower downswing in terms of that wave compared to the first 2 waves. And that has a sort of a knock-on effect in terms of your nonmedical COVID PPDs and your surgical PPDs in terms of the ramp-up. And that can also be reflected in terms of the graph on the right. So move on to the next slide, Slide 22. This slide shows a sort of 5-year sequence of the revenue for the Southern African business across each of the business lines. And what is pleasing to note that, for each business line, the acute business, the complementary services and health care -- and the health care services lines that we are now at slightly above our pre-COVID levels, which is pleasing to see. What's also of interest is that in the 2017 financial year, the acute business is made of [ 89% ] of the Southern African business. And that is now a down to 86%, which is in line with our strategy of diversifying our -- across our different business lines. So if you move on to the next slide, Slide 23, this slide shows our revenue numbers and our EBITDA percentage margins over the last 4 halves. And I suppose the point of this slide is to show how we've improved over each of these halves as the business has adapted and performed better within this COVID pandemic. So starting with the graph on the left, the H1 2020 bar is really a pre-COVID half. And then you see the next 3 bars reflect the halves with each 1 having a COVID wave. And what you see on the revenue line is an improvement across each of these halves across each of these business lines and finally, H2 2021, experiencing revenue higher than our pre-COVID half, which is good to see. The graph on the right covers our EBITDA margin progression. And you can see the steep drop-off in H2 2020 when the first wave hit and the country went down into a severe lockdown. And you can see how -- despite waves 2 and 3, we've -- our margins improved. In H1 '21, we jumped to 16.6% margin. In H2 '21 that improved again to 17.6%. This -- as we adapt to COVID and become better at managing our costs. This is an ongoing process, and we do expect to continue to see margin improvement going forward. Move to the next slide. So this shows sort of the numbers, and Pieter will go through our numbers and our financials in more detail. So I'll just focus on a couple of points. Our PPD is -- our PPDs are slightly above prior year, which is good to see. But you can still see that we are down on pre-COVID PPD numbers, and that's reflected in our lower occupancies. We've had a good improvement on revenue with revenue growing by 10.3% from prior year and an improvement to our margins with our normalized EBITDA growing by 12.2%. What we do still see is a very different case mix within our hospitals, and you can see that within our acute hospital business. We had a 9.8% growth in our revenue per PPD. And that's made up of a 4% tariff increase and a 5.8% positive case mix shift. And this case mix shift plays out not just in terms of sort of that 5.8% but also plays out [ down to stay ]. And that has changed from normally pre-COVID levels from around about 3.6 days on average to now just 4.4. And that is something which will continue to be there as long as we have COVID cases coming through our hospitals. If you go to the next slide, please. So moving into the -- sort of looking at each of our business segments, starting with our acute hospital business, which is 86% of the Southern African business. The graph on the bottom left shows the impact of the COVID waves in our business, and you can see the drop in the pickup of our acute surgical PPDs as well as our acute medical PPDs. And what's interesting is always the debate about what's happening with theater cases and surgery. But what you can see from that graph is actually the impact on our non-COVID medical PPDs is more severe in each wave than what we experienced in the COVID -- in the surgical PPDs. And that's something we have to deal with. And I think it's reflective not just of the hospital environment. It's reflective of the environment we live in, in terms of COVID. The graphs on the right show our recoveries over the halves in terms of our PPDs and our theater minutes. Our acute PPDs are now on par with last year. And our theater minutes is slightly down, but that's reflective of the longer wave 3 and the impact that had on H2 2021. And you can see there's only a slight increase on our theater cases or theater minutes. The graph on the bottom right shows occupancy levels, and it was good to see that as a group, we had the last 6 months occupancy of 60%, and it's broken down between a 59% occupancy for our acute business and so fast improving recovery in our complementary services of getting to a 65% occupancy, which traditionally in the past has always had strong occupancies. Move on to the next slide, which covers our complementary services business. And this business really can split into 2. We've got our mental health and acute rehabilitation on one side. Then we have renal dialysis and oncology business on the other. And both the mental health and acute rehab businesses are severely impacted by COVID waves. And you can see the steep drop-off from PPDs in H2 2020 for both those lines of business. We have recovered in both more so in mental health. The acute rehab business is still slightly down on 2020 numbers but understanding that, that business comes off an exceptionally high occupancy. So the occupancies for the acute rehab businesses are still good. And the trends we've seen for both those businesses in the last few months is good and continues to improve. The renal dialysis business and oncology business have both done extremely well. And both those businesses in terms of activities, revenue and EBITDA are above pre-COVID levels. And that's a result of an increased footprint of those businesses as well as a focus on the underlying operations in both renal dialysis and oncology. We then move on to the sort of final segment of our business, which is health care services. And that's made up of our -- of 2 businesses: Life Esidimeni and Life Employee Health Solutions. Firstly, in terms of Life Esidimeni, it's had a really good performance, consistent revenue growth and stable margins despite the pressures that we know COVID brings. And Life Employee Health Solutions had a -- also had a good year, good revenue and good margin growth. And this is on the back of the traditional occupational health and wellness business has been supplemented by a whole range of COVID products. This particularly benefited us in the first half of this year. It did tape off a little bit in H2, but still an overall, for the 12 months, a good performance from both of these businesses. And then finally, just in terms of our quality slide on Slide 28. This shows our quality outcomes. And I think under the -- it is really an excellent performance under some really difficult circumstances. Our patient experience is on par with prior years. Our patient adverse rate shows a good downward trend. Our employee safety shows improvement. And those numbers exclude the impact of COVID. And if we are to include COVID, the 2021 number, 3.5, would increase to just over 9.1, which really does show the impact that COVID has on health care workers. As a matter of interest, that number in 2020 would have been -- was over 14. So it does show the improvement that Life Healthcare's had in terms of managing employee safety with the COVID pandemic. And I think it also shows what happens when circa 80% of your staff get vaccinated and the improvement that flows through from there. In terms of infection prevention measures, had a good overall performance despite the impact of COVID. So on that note, I will now hand back to Peter Wharton-Hood for the growth initiatives section.

Adam, Mark, thank you very much, and my sincere thanks to you and your teams for the successful results delivered during the course of the year. If we move on to Slide 30 and start talking about the growth initiatives, we start with Life Molecular Imaging, a small part of our business but one that definitely has attracted a disproportionate amount of attention, some speculation and a lot of curiosity. Just to refresh memories. Our target product is called Neuraceq, which is an imaging tracer and a key part of diagnostic process in the treatment of Alzheimer's. [indiscernible] influenced by the ability for clinicians to be able to treat Alzheimer's disease with the drug, and in that particular regard, Biogen's aducanumab, a drug which slows the effects of Alzheimer's disease, it did receive FDA approval on the 7th of June. So clearly, the ability to treat the drug will drive up the volumes of diagnostics that are required to identify the disease in patients. Some of this is now beyond our control because, clearly, until such time as the medical aids in the U.S. agreed to pay for Aduhelm treatment, the growth in that market has to wait. So the deployment or sales of our Neuraceq [ iso tracer ] is dependent upon the reimbursement agreements being established in the U.S. Clearly, we had 2 choices. We could either wait for those reimbursement agreements to be completed or we could preempt those and as we detailed below, invest for the success of Neuraceq. So what we did, we actually committed to invest GBP 7 million on head count and a further GBP 2 million on manufacturing equipment to effectively set up the sales force and secure the manufacturing capability for Neuraceq in the U.S. With that, we appointed a commercial office in the U.S., and we signed manufacturing agreements both in North and South America, Europe and Asia. So we are geared for the sale of Neuraceq, but the demand for Neuraceq is dependent on those reimbursement initiatives being completed in the U.S. We move to Slide 31. We can see that we're well positioned across the globe, both with active supply sites and the site setup that is ongoing to be able to deliver our tracer across the world as demand increases. As I said earlier, a lot of this is beyond our control now, and we wait for regulatory authorities and the reimbursement models to be finalized. Further initiatives on Slide 32 take us into the product pipeline that exists within Life Molecular. Life Molecular is not just about Neuraceq. It has more than 2 decades' worth of research and has products that are critical in the diagnostic processes for neurodegenerative diseases and cardiovascular across a range of targeted diseases, starting with Alzheimer's, which I've already described, Alzheimer's and PSP, neuro-inflammation, Parkinson's, our florbetaben tracer for cardiac amyloidosis and thromboembolisms, strokes. What you can see there from the development stage, some as in Neuraceq, already in the marketed position; others in Phase 1; others in Phase 2 of the development stages. We've only sought to identify the market opportunity around Neuraceq. And as more information comes to hand, we will start to discuss the prospects for the other products sitting in Life Molecular's pipeline. Moving to Southern Africa on Slide 33. We have spoken at length about our entry into the SA imaging market. We've made good progress in the acquisition of imaging businesses, constructive discussions around cooperation and partnering. As we've always said, partnership with radiologists is key to the delivery of our end game. And in that regard, we have now covered about half a dozen of our hospitals with further details to emerge in due course. Fortunately, the HPCSA also approved the employment of radiographers, which allow us -- which will allow us to acquire and deploy our infrastructure in the country. From a complementary services perspective, Adam has already described the growth, which took place during the course of the year, but we will be pursuing further opportunities in mental health, acute rehabilitation, further investment in renal dialysis and the development of our oncology center of excellence at Life Vincent Pallotti in Cape Town. We also announced during the course of the last month, the formation of our South African radiopharmacy joint venture in a joint venture with AXIM. Effectively, this establishes the initial footprint towards a vertically integrated PET-CT scanning and oncology offering, and we will be building 2 cyclotrons in Gauteng to service South and Southern Africa within the next 2 years. Our strategic objectives remain to stabilize existing operations, expand our existing business lines, introducing new lines of business into our care continuum and to transition to digitally enabled businesses in due course. I'll now hand you over to Pieter van der Westhuizen, our Group Chief Financial Officer, to take us through the numbers.

Thank you very much, Pete. Ladies and gentlemen, good morning. Just first, as my colleagues, just want to thank the back-office teams to help us deliver these exceptional good results for the last 12 months as well as for the first time in more than 10 years, we were able to produce audited financial statements on the date of release, and these are published on our website. And you're welcome to go through that. In summary, our reported revenue for the year is up 12.7% to ZAR 26.9 billion, driven by exceptional strong performance in the international business and a sequential improvement in the SA business on half-on-half since last year 2020. Normalized EBITDA at ZAR 5.1 billion, up 21.6%. And then an exceptional strong working capital management resulted in our cash from operations, up 24.7% to ZAR 5.7 billion. Earnings -- normalized earnings per share from continuing operations, up 88.3% on to ZAR 1.098 per share. If you remember, last year, we've announced the disposal of Scanmed. That was completed in the current financial year just before the half year. And the net proceeds of ZAR 681 million after taxes and costs were deployed to reduce debt levels in the group. That plus a good cash generation from operations resulted in our normalized -- or net debt to normalized EBITDA at ZAR 1.82 billion -- at 1.82x. We've still got undrawn facilities of ZAR 6.6 billion. And we will, as a group, review the facilities in the next 12 months. We've kept the facilities on hand because we didn't know how COVID was going to play out. But we want to make sure we optimize the facilities going forward and only have facilities available so that we don't pay additional costs on this. Now going to next slide, Slide 36. On the income statement from continuing operations, I talked about the revenue at ZAR 26.9 billion roughly, normalized EBITDA of ZAR 5.1 billion, normalized EBITDA margin improvements from last year at 17.4% last year and current year at 18.8%. Last year, we had, in the first half, no COVID. We had a dramatic impact in the second half. And we saw the benefits coming through in the current year where the teams have been able to manage in the COVID environment and sequentially improve the operational efficiencies resulting in 8.8% -- 18.8% normalized EBITDA margin. Other than what I want to highlight is the net finance costs reduced from ZAR 798 million last year to ZAR 578 million, driven by the reduction in debt due to the disposal of Scanmed as well as for good operational performance and the cash management. The effective tax rate is down from almost 40% last year, and that's largely due to the mix of business units that we can't offset losses in certain operations due to COVID and also because of performance and in the current year, effective tax rate at 26.7%. We did raise some deferred tax assets in the current year on the sales losses that we have now more clarity in terms of being able to utilize that in the foreseeable future. And that resulted in the tax rate coming down. We do strip that out on our normalized earnings per share. And I'll talk to that on the next slide, please. Earnings per share at ZAR 1.206. Last year, we had a ZAR 0.064 loss due to the impact of COVID but also due to the impairment of the Scanmed asset. If we strip that out, ZAR 1.111 in the current year headline earnings per share and last year, ZAR 0.487 per share, ZAR 1.281 -- 128.1% up. Earnings per share from continuing operations at ZAR 1.146 and ZAR 0.485 in last year. That's when we strip out Poland. Headline earnings per share from continuing operations with all the above items excluded, ZAR 1.333 (sic) [ 133.3% ] up. And then at the bottom, you can see the one-off tax items that we excluded in the numbers. It's a profit in the current year. Last year, it was a loss of ZAR 0.081 impact, giving us ZAR 1.098 per share compared to last year, ZAR 0.583 per share, 88.3% up. Next slide, please, the segmental financial results. Adam and Mark has gone through their different operations. Just want to highlight on this slide, on the graph on the right-hand side is how we tried to show what the impact of COVID has been, and the dramatic impact is very clear. If you look at the H2 2020 normalized EBITDA and how that has been improving since then between H1 2021 and H2 2021, you'll see there's a slight drop-off in normalized EBITDA for the international operations in H2. And that's driven by the PET -- the CT contracts that we had with the NHS, where we provided COVID-related services to them. That was repriced after the half year. Those contracts came to an end at the end of September, and it's not continuing in its current form. On the left-hand side, we show -- we reflect the constant currency percentages as well. We had, in the current year, a bit of a stronger rand and hence, the numbers are slightly weaker in a percentage growth compared to on a constant currency basis. But international operations clearly demonstrate a good operational performance with revenue up in rand terms, 18.9% and EBITDA 38.2%, at ZAR 1.8 million at normalized EBITDA. On the bottom right, as we normally do, we reflect what the income and costs that sits in corporate. And as normal, the net result of that should effectively be added to the Southern African operations because, currently, they carry most of the costs associated with the corporate cost. Next slide, please. On the balance sheet side, strong financial position. And as I said, we've got available undrawn bank facilities of ZAR 6.6 billion at 30 September 2021, our net debt due to a normalized EBITDA at 1.82x compared to last year at 2.96x, a very strong performance. And we, as an organization, target net debt to EBITDA to be below 2.5x. Next slide, please. And probably one of the things that I'm very excited about is the ability of the teams to manage the working capital. On the right-hand side, we set ourselves a target to have cash generated from operations as a percentage of EBITDA above 95%. And you could clearly see how well we've done with 113% in the current year, up from 110% in the previous year. Cash -- free cash flow is up 49.4% to ZAR 2.7 billion compared to last year at ZAR 1.8 billion roughly, so in a strong cash position, a strong balance sheet and a very strong performance in the current year from an operations perspective. Next slide, please, the debt breakdown as of the end of September. The weighted average cost of debt on a post-tax basis has slightly increased, but that's largely due to the reduction of a Polish debt where we were able to have very good margins on these. And as we exited Poland, the Scanmed business those would have disappeared and it's really just a mix. You could see that if you compare it on a line-by-line basis, most of these weighted average cost of debt for the various debt facilities have slightly reduced. Overall debt at ZAR 13.1 billion, excluding the cash on hand. Next slide, please. Our debt repayment profile, we've got maturing -- debt maturing in roughly about ZAR 1.8 billion in the next 12 months. Most of this sits in the South African operations. And we're already in the process of refinancing these, and we will push it -- some of it will be repaid and some of it will be refinanced. Next slide, please. And then finally, we have updated our dividend policy slightly where dividends will be paid taking into account the underlying earnings, cash, available funding. And we want to retain sufficient capital to fund ongoing operations and growth projects, and we want to maintain gearing levels within acceptable levels. Based on this policy, the Board approved a final gross cash dividend of ZAR 0.25 for the half year ending at the end of September. As you will remember, we didn't declare a dividend in the first half. And this dividend will be paid mid-December. And I'm going to hand you back now to Pete to take us through the outlook. Thank you, Pete.

Thank you very much, Pieter, and my thanks to you and all of your teams for the delivery during the course of the year. We then move on to our outlook for the company. Our purpose is very simple, making life better. We see ourselves as an international health care provider. We will deliver it through a diversified offering. We'll be recognized for our clinical excellence and our dependence on analytics and technology to [ forge ] the difference. Our strategic pillars and enablers are outlined on Page -- on Slide 46 remain the same. Market-leading quality care, the use of technology, engagement with all our stakeholders and delivering growth through diversification will be achieved through skilled and dedicated professionals, the modernization of our technology infrastructure, and taking our data and analytics to the next level, so it is recognized as a key competitive differentiator. On Page 47, from a vaccination perspective, we're now looking at the U.K. and Europe making solid progress with vaccinating the bulk of their populations. Approximately 90% of all our AMG health care workers have received their first vaccine. In Southern Africa, approximately 80% of all Life Healthcare employees, doctors, health care workers and contractors have been vaccinated. In South Africa, 40% of adult population has been vaccinated. And taking data from Discovery Health Medical Scheme, we can see that 76% of those aged over the age of 60 and 65% of those over the age of 50 have been fully or partially vaccinated. So clearly, progress is being made, and this is factored into the way we see our business going forward. From our own business' perspective, we played a role in assisting the government in the country-wide vaccination program by making 22 vaccination sites available, committing 320 of our staff dedicated to these vaccination sites. And we've already carried out approximately 380,000 vaccinations. In a further step forward, inside Life Healthcare, we have implemented a mandatory vaccination policy for employees starting in December of 2021. Then move to Slide 48. Our overall outlook from an international perspective is a more normalized operating environment off the back of the progress with the vaccination efforts. We see continued growth in underlying scan volumes across the U.K., Ireland and Europe. As I've described, we will invest in LMI's operational capability to position the drive for Neuraceq sales and the manufacturing of Neuraceq. Mark described the investment in the exciting community diagnostic center opportunities that are now becoming available in the U.K., and we have committed to spend capital expenditure of approximately ZAR 1.6 billion in 2022 in our international business. Domestically, we have prepared the business for additional COVID-19 waves. Could it be waves 4 and 5? And we do see that our responsibility is to be able to operate with COVID ever prevalent as perhaps the new normal. We expect continued improvement in our paid patient days, improvements in occupancies and further improvements in margins in 2022, of course, subject to the timing and the magnitude of the COVID-19 waves if and when they result. There will be continued focus on our business optimization programs, further execution against the SA imaging transactions and the growth opportunities in complementary services. We will continue to modernize our IT infrastructure, make further progress with our cloud migration and further develop our data analytics capabilities. Capital expenditure domestically will be of the order of ZAR 1.3 billion in the year ahead. At an overall group perspective, our outlook remains cautious given the ongoing COVID-19 uncertainty. We will continue to maintain a prudent gearing level and continue to carefully manage our cash. We do expect continued revenue growth, and we do expect continued margin expansion. We're excited by the growth opportunities both in South Africa and the international operations. And now it's down to the teams to maintain the clarity of the vision that we've established, deliver against the strategy, put our heads down and get the job done. Thank you for your participation. We will now take questions.

[Operator Instructions] At this point, I don't have any questions on the lines. I will now hand over for questions from the webcast.

Thank you, operator. We have a few questions related to the U.K. So we'll just start with those first and give Mark Chapman a chance to answer those. A few of them relate to the same thing, so I'll only read one of them out. And that is really could you give us an indication of how much revenue is currently generated by COVID-related contracts within AMG.

Yes. Thanks, Mark. It's approximately GBP 20 million in revenue, and that's across all territories. So that's the laboratory work in Italy. It's the CT mobiles, which is in the U.K. and some activity in Ireland as well. And I've seen a question about how is that going into 2022. We know that the CT mobiles has gone to business as usual, but they are being utilized. Laboratory work continues. And what we are announcing is the waiting lists are increasing. So we're moving away from COVID initiatives, but certainly, there's still short-term waiting list initiatives that the NHS, ASL, HSE are asking us for assistance with.

Thanks, Mark. And just to be clear, that was a GBP 20 million revenue number. The second question just relates to the investments into the CDCs. Does that impact our guided CapEx significantly going forward? The answer to that is that it is included in our CapEx guidance within the international business. And then, Mark, sorry, one more for you. Do you see any supply-side risks associated with addressing backlogs in diagnostic imaging in the U.K. and Ireland, particularly referring to things like capacity and availability of resources?

Sure. Okay. If I answer the CDCs, the NHS are on the journey at the moment. Our framework is just coming out and we are in discussions with, like I said earlier, a number of trusts and IC, integrated care systems. The impact in this year in the guidance is not going to be significant. We are forecasting into 2022 -- back end of '22, '23, where we'll like to have a number of these initiatives underway. That will require additional CapEx, which isn't within the guidance for this year. But we are minded of that. And to Pieter's point earlier on around sort of the debt and the provisions, we know the size of the opportunity, and we are forecasting for that accordingly so that we can partake in these exciting opportunities. So I've seen a question from [ Kane ] as well, so answer that one, referenced the challenges. I think, yes, it is going to be a challenge. The amount of demand out there at the moment is high. The teams are working through these effectively. But the radiographers, radiologists, we know it's a finite pool, but we do plan accordingly. And there's innovation kicking in as well to help the activity levels. I think we also just need to be mindful of equipment, not too dissimilar across a number of other areas, but the availability of scanners are being pushed out because of the chips, like cars, et cetera. But again, we foresaw that circa 6 months ago and are working with the OEMs to ensure that we can put -- we have put preorders in and to make sure that we're at the front of the queue on those. So it's not going to be easy, but we're very mindful of the challenges. And we're navigating our way through that accordingly to make sure that we can maximize the opportunities that lie in front of us.

Thanks, Mark. Okay, we've got 1 or 2 South African questions. The first one, what sort of tariff increases can we expect in 2022.

Mark, I think the tariff increases are pretty much in line with CPI like they've been for the last 3, 4, 5, 6 years, so nothing changes going forward in that regard.

And then a second one just on what are the current occupancy levels in the mental health business? Can you comment on that?

Yes. Look, I mean, we said in the last half, occupancies were -- in the complementary services were 65%. And that's kind of made up of mental health be in the low 60s and acute rehab be in the [ late ] 60s. These numbers have improved as we come out of wave 3, and they continue to improve as we sort of go into the 2022 financial year. So those numbers both -- the occupancies of both of those businesses are picking up nicely.

Thank you, Adam. One more just on can we expand on our strategy to pivot towards non-acute services in South Africa? And do we have any specific targets, revenue split targets in the medium term? And will most of these come from organic or acquisitive means?

I suppose we have internal targets, which we have. But I mean we've consistently said that we want to diversify across our different lines of business, understanding that in mental health, acute rehab, et cetera, the revenue per day is they are lower than the acute hospital business. And so it's a process, right, to sort of increase the percentage of revenue that comes from those businesses. But what we have seen is there's really good growth out of renal dialysis, oncology. We've said we'll be looking at the imaging businesses in SA. So we do expect that trend to continue over the next few years [ like kind of urology ] in terms of what the sort of internal numbers are. But you can see from, I think, slide that Pete put up in terms of overall trend for Life Healthcare as a group in terms of the diversification out from acute care over the last sort of 5 or 6 years.

Thanks, Adam. I think a follow-on from that is will other South African groups be able to compete with AMG in the SA imaging markets as one of our growth vectors here.

I'm sure they be able to compete. They have their own -- all have their own skill sets to understand the size of the market. Yes, I can't really comment on behalf of our competitors. But what I can say is that Alliance does bring a unique skill set in terms of radiology and imaging. I think they do more MRI scans than the entire private SA health care market does in a single year. And so they've got a skill set, which is going to be very useful for us in terms of SA.

Yes, Mark, if I can also add to that, too, we encourage healthy competition in all aspects of the delivery of health care that promote accessibility and/or the affordability of services on offer. Clearly, the expertise from an imaging perspective that we've developed and made better internationally, we'd like to be able to deploy in South Africa as previously broadcast. The benefits of patients, we -- competition is good for us.

Thank you, Pete. Thank you, Adam. I've just got one question -- a couple of more questions back on the international front. What portion of international CapEx will be allocated to Neuraceq sales and manufacturing?

Yes. Overall, it's a very small proportion. As we said, for the manufacturing, it was the GBP 2 million. We've increased -- we've done an investment of GBP 7 million to people. But yes, it's a very small number. It's not significant.

Thanks, Mark. And then last one, given the Sir Richards report on the NHS diagnostic capacity and the increase in NHS budget allocated towards building out the NHS' own diagnostic infrastructure [indiscernible] sourcing moving forward?

Sorry, Mark, you just broke up on the last bit. I think you -- did you say how realistic is the outsourcing?

Yes. Or what are the risks to AMG if the NHS insources a lot of its own work?

Yes. Look, at the moment, we are talking to a number of trusts and some trusts see it as an investment or CapEx from government to bolster their own services, and they are just going to do much of the same. The trusts we are talking to can see the benefits. They have seen what we've actually done within diagnostic centers, and it is a partnership. So I think the skills that we bring to mobilize these CDCs effectively with some, in cases, dual staffing, which is a pressure point for the NHS, we are having very positive conversations. So some trusts will want to do it themselves and have ambitions to actually do it in the community rather than just inside the hospital as I said to start with, but it is encouraging at the moment. And again, the Mike Richards report and other papers, he actually cites Alliance Medical and the work we've been doing in the U.K. and Italy around diagnostic centers. So it will come down to individual ICSs and trusts, but I'm quite confident at the moment.

Thank you, Mark. Operator, do we have any calls -- any questions from the call?

Sir, we have no questions on the telephone line attendees. I will now hand over to the CEO for closing comments.

Thank you. All that remains is for me to express my thanks to all of you who've joined the call and once again, to all the management teams around the world that contributed to the 2021 outcome. Thank you very much, and goodbye.

Thank you. Ladies and gentlemen, that concludes today's event. Thank you for joining us. You may now disconnect your lines.