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

Good morning, ladies and gentlemen. Good evening to give the pleasure to welcome to the Annual General Meeting of the shareholder of Life Healthcare Group Holdings Limited. I'm Victor Litlhakanyane, Chairman of the company. In interest of the is safety. The meeting will be conducted through the participation as provided for by in terms of the closures of the [indiscernible] corporation. Here, we pay navigate the platform. [Operator Instructions] We have a question on a particular resolution, please have your name, resolution number, followed by your question and press Enter or Send. Or tentively, if you'd like to address the correctly, please click on raise as a 5G, the macro phone will be a beta and able to address energy or general questions and comments we digressed after all the resolutions have been put to the meeting. The results of the poll will be announced before the close of the formal business of the meeting. The comments for this meeting, I had a list members attended to vote are press presented either by proxy or letter of presentation and in terms of the company's act that at least of share in the issue are represented. A quorum of shareholders is present represented at this meeting and accordingly we declare the meeting [indiscernible] The notice convening this meeting was circulated to all shareholders of the company and had to receive such a notice within the [indiscernible] The notice contains full details of the special and ordinary resolutions to be considered at this meeting. I propose that we can take the notice as read, adding objections through this procedure. [Operator Instructions] As there are no questions in the meeting, proceedings of the meeting. It is my intention to conduct voting on all the resolutions for by way of poll. I hereby nominate of meeting specialists to act as scrutineer. Please note that only shareholders in possession of a proxy, which has been filed in accordance with the Notice of Meeting or shareholders who has elected shares register or in possession of original letter of presentation and to speak and [indiscernible] any person not, however, pose questions about the conclusion of the meeting. I will now hand over to the group company secretary to provide a few points on how to cast your vote.

Thank you, Chairman. All shareholders or their representatives who have requested to vote would have received the link to the voting platform to either the mobile number or e-mail address. Please click on the Vote Now link and it will direct you to the voting platform. A copy of the balance is now being shared with you. You will see that all the resolutions are listed under that and the Submit button is at the bottom. The notice of the voting platform contains all the resolutions, which have been published in the notice of meeting with your both automatically defaulted to update. The Chairman will read each resolution. And at that point, you may indicate your vote individually per resolution by selecting the relevant option for, against or abstain on a resolution-by-resolution basis. You may vote on all the resolutions simultaneously are defaulting all your votes as either for or against or keeping it as abstain vote and clicking on the Submit button on the bottom of the electronic ballot form. Once you have voted on all the resolutions, scroll down to the bottom of the ballot page and click Submit. A message will pop up on your screen confirming that your votes have been received. Please note, once you click Submit, your vote cannot be recasted and revoted. As such, please ensure that you selected the correct option on the resolution that's either for or against or abstain. Again, please do not hit the Submit button until you have voted on all the resolutions. The Chairman will announce the results of the resolutions voted by way of poll once all the resolutions have been voted on. Are there any questions regarding the procedure? I'll now hand back to the Chairman.

Thank you very much, Rochelle. Before we proceed with the formal business of the AGM. The group financial officer, Pieter van der Westhuizen iteration will provide a high level overview of the company's performance for the end review. Over to you, Mr. Peter.

Thank you, Mr. Chairman. Good morning, ladies and gentlemen. I'm going to take you through the highlights of the performance of the group in the last financial year as well as summary in terms of the financial results following on from operational performance. Next slide, please. We had strong underlying operational performance across all our markets. with good return of activities in all the markets we operate. In South Africa or Southern Africa, the patient days gone up 5.8%. Theater minutes close to 15% up in occupancy levels recovered to around 62%. It's still a bit below where we were pre-pandemic, but we're showing good recovery, specifically in the second half of last year. Revenue in Southern Africa has gone up 5% and normalized EBITDA going up to growing by 7.2%. Alliance Medical Group operating in Europe had strong activity numbers with U.K. tape volumes growing up 11.1%, Italian volume, 7.5% and the Irish activities had a strong growth of 24.4%. Revenue for international operations were ZAR 7.7 billion. Group's revenue, ZAR 28.2 billion and normalized EBITDA of ZAR 5 billion. The group has also declared a final dividend of ZAR 0.25. Next slide, please. On the income statement, the overall revenue, as I stated, around 5%. Southern Africa, with 5% in the international business at around 2.8%. A strong recovery in H2, we saw revenue growth in SA of 5% include to imaging acquisitions, offset by a mix change and reduced Life Health Solutions revenue. Continued volume growth across all the ANG regions contributed to a revenue growth of 2.8%. Increased LMI volumes through the growth in initiatives with 43% growth in revenue. The decrease in normalized EBITDA across the group where we are kind of flat, but the 0.2% lower is largely due to AMG benefiting from COVID-related contracts in the prior period that did not recur in the current year. We have also introduced a co-investment shares keen for senior management in the current year that's included as part of the EBITDA for the current year that wasn't included last year. Non-COVID related items of ZAR 286 million profit compared to ZAR 59 million profit in the prior year consisted out of a release of a contingent consideration of ZAR 457 million as well as the provision for a dispute on a contract interpretation of ZAR 137 million. Normalized earnings per share of 96.4% declined by 12.2% after stripping out the nontrading related items. Headline earnings per share from continuing operations [indiscernible] against last year's 114.3% of ZAR 0.143. Next slide, please. The balance sheet, a strong financial position with available undrawn facilities of ZAR 4.4 billion as at the end of September last year, and we do expect to spend about ZAR 2.9 billion of CapEx in the current financial year of 2023. And gearing in terms of how the banks are measured, net debt to normalized EBITDA is at 1.89%, slightly up against last year of 1.8%. Net debt is at ZAR 10.8 billion compared to last year, ZAR 10.3 billion. So the debt levels also include the successful launch of our orbital bond issuance in Southern Africa where we raised ZAR 1 billion. Next slide, please. Cash from operations is down 11.6%, but that's largely driven by the impact of the EBITDA being flat and a slight investment compared to the prior year in working capital. We still have generated 100% of EBITDA in cash from operations. Overall, the net cash flow after CapEx and investments is a positive ZAR 341 million, and the dividend per share, as indicated earlier is $0.25. That's the final dividend with the interim dividend in current year. Thank you very much.

Thank you very much, Peter. We'll then proceed to the annual financial statements, a propose the approval and adoption of the statements for the year-ended as set out in notice this meeting. Annual financial statements are contained in a report, which has been sent to you and fully covered activities of the company for the year-end review. I have nothing to add to the information before you. Are there any questions? There have been no questions that 2022 annual financial statements are now getting adopted. We then move on to the Social Ethics and Transformation Committee report. The report from the Social Ethics and Transformation Committee comment for AI and the September 2022 is increased traded annual report as card on. I'll now hand over to the Chair of this committee of to provide a presentation on their of their comfort. Over to you.

Thank you, Chair. Morning, everyone. I'll take the report right, and I'll talk you through the working on the finding. If you look at the first slide, yes. Thank you. That's just really to give you a highlight of the committee is a very strong committee it 5 from men and women. The Chairman of the Board is standing invite the executive and Functional heads attended meetings and we've held 3 meetings a year, and where need be any special meeting to take place to address subitem. Next slide. focus for 2022 were spent around quite a series of deep dive, which are important in -- for the committee to make sure that we covered issues around both the social component, the ethics from transformation component transmission diversity infusion, talent management, resourcing procurement as well as the ESG strategy, which continues to be a key focus of the committee. We've had some standing agenda items relating to patient relationships was master BBB progress legislation, and this affects both local and international operations. Thank you. Next slide. As part of that focus, it's important to highlight across the business is to also align the FX and business integrity looking mainly at the environmental health in patients having safety, the social and economic perspectives and development component are good issues of good corporate governance relations, labor employment practices. And again, I reiterate our locally and internationally, and this remains a key focus area of the committee. In terms of from an ESG component, we remain focused around trying both to not just push the compliance component but be strategic around our sector. Looking to align targets across the 3 components together environment 20%, social 45% and from a governance point to be 35% and this again at line international business. Some key highlights to look into and say, for example, solar and substrate now that energy remains to be a challenge across at least not just in SA, but globally, initiatives with initial to drive further solid inflation across the less successful or collaborate affect our new renewable energy companies to partner with the CDCs built around efficiencies in units for 22% reduction of carbonization as well as if you look at the water component, our initiatives continue to reduce water on waste we are committed. And there, management has actually made great progress or 1 of the highlights of the ESG components that the committee dealt with in the commitment to 0 waste to longer as well as in international. But more important, what was the highlight was we to focus on some of the specific highlights of our hospital in the group. Look at the next slide. On the total highlights, Life Healthcare in colleges we trained 1,500 nurses over 3 years, as you have I'm sure have followed through the initiatives and activation by group CEO around the need to improve in that particular sector from a nursing point of view and life commitment The partnerships are both local and international universities across from a training point of view we have to grow a mast. We have to make a contribution, not just to Life Healthcare, but across the country and globally, and we remain committed to that limit is focused on On CSI, CSI takeover 5 years of $277 million anything from sale plans, which we reported on before, all the way to the for children as well as folks in on Yankee for dementia and internationally, our focus around the gate card in the U.K. and Ireland. In terms of clinical on the multiple quality metrics, we also are focused on a value-based share of the products we put forth. And as you'd have followed as well again in the press or continue to track the approval of the diagnosis and from a patient satisfaction point of view when they came a and continue to strive to expect better and some in the committee for should as well. Next slide. Some highlights from a social and a drive point of view, is just give you a sense of some of the activities that we -- the company and the group has been part of. I think the unfortunate, sliding incident is something that we're all familiar with and Lifestyle get participated in providing some release there. We continue to drive awareness about cancer and then drive some in drive was a highlight. And 1 of my favorite to continue to be a key program that we are running and continue to be successful. Next slide. Continuing on the highlights on international point of view, again, cancer features for the cancer for children is an area of focus. If you look at from a community point of view as well as Dublin, the charities for the homeless and highlights for the year. And I'd like to also thank an international colleagues because in addition to the tactical running the business, CSI matters continue to be how we do good business as part of life of care. Next slide. Finally around -- from a governance point of view, highlights around that for continuing to ensure succession planning across the board composition, diversion key in our presentation is top of mind, which I'm sure you have seen in the report continues to progress. On the PC side, our FX office and our FX team continued to move beyond a compliance driven approach, a more proactive approach. We will have revised quite a few of our policies, our call conduct, antibribery and corruption of the whistleblowing competition and concept of interest beyond just compliance to just monitor that. The Committee spent quite a bit of time unpacking areas of best factors across the group and areas of improvement in this matter. ESG oversight, the Board has acknowledged and committee has acknowledge that we continue to drive this as a strategic key area, not just with an oversight area. So from a board commitment point of view, while we have a note accordingly from a compliance point of view. It's also an area that the committee members spend a long time after the required parameters [indiscernible] are pleased to report that the ESG board reporting process is not just compliance, but part of how we're integrating the business. And then finally, I want to just highlight again focus from a committee point of view, the committee is satisfied that it has a share responsibilities in accordance with its mandate for the year and in 30th of September 2022. I'd like to thank all the committee members and management specifically becomes from a set point of view we have gone beyond complying to constantly ask the questions around being relevant society as well as being relevant to the communities that we serve constantly. I thank you.

Thank you very much. Question is to question. My questions here. Thank you very much. If there are no questions, I'd like to remind the shareholders that stepdown as the Chairman of the Committee [indiscernible] We contribution as Chairman and will remain under [indiscernible] I also want to thank was happy particularly so in We're now into the formal business of the AGM. Please move that we will in fact present on the solution for meeting. We have our questions pertaining to a solution, please raise your hand. to the group in not with the will be able to ask your questions. The formal continues on improved even open a questions. Move on to resolution. We'll now proceed to vote on the following resolution. Ordinary resolution #1. I propose resolution #1 to appoint Deloitte & Touche as of the company and you can change [indiscernible] architecture conclusion of the next year or of the Company's Act. We will now vote on the ordinary resolution #1 on the voting platform. Please record your vote. I must remind everyone looking at new [indiscernible] In accordance to the company's corporation, [indiscernible] are subject to recovering in relation by [indiscernible] and consider to elect this retiring director as the company [indiscernible] Ordinary resolution 2.1. I propose ordinary resolution #2.1 hereby reelected our company, we can get [indiscernible] for We now go ordinary resolution #2.1 is voting platform. Please record your vote. I propose ordinary resolution #2.2 hereby elected independent director of the company with effect from We'll now vote on the resolution #2.2 on voting platform. Please record your vote. ordinary resolution #2.3. I propose ordinary resolution #2.3 hereby reelected as independent Director company will be processed from encapsulation. We now vote on the resolution #2.3 using the voting platform. Please record your vote. Ordinary resolution 2.4, I propose resolution #2.4 by the appointment of consents as we Director of the company with effect from the We'll now vote on ordinary resolution #2.4 using voting platform. Please record your vote. Ordinary Resolution 2.5. I propose ordinary resolution #2.5 that the appointment of the company with effect from the saturated. We are now vote ordinary resolution #2.5 suing the voting platform. Please record your vote. Ordinary resolution #3, reelection of audit committee members. To reelect our way of separate solutions, members of the Audit Committee consisted of imperatives section and reform of the Company's Act and our pay deck in terms of Section 94 of the Company's Act to perform the duties which was the 947 at large described the its terms of reference. Ordinary resolution #3.1. I propos resolution #3.1 that Peter Golesworthy, who is an independent director hereby as a member and the Chairman of this Committee. We'll now vote on resolution #3.1 platform. Please record your vote. [Voting]

Resolution #3.2. I propos resolution #3.2 that Caroline Henry, who is an independent non-Executive Director hereby reelect as of the audit comment. We'll now vote on ordinary resolution #3.2 within the voting platform. Please, record your vote. [Voting]

Now Resolution 3.3. I propose for resolution #3.3 that Lars Holmqvist, who is an independent non-Executive Director reelected 2023 as a member of the Audit Committee. We will now vote on Resolution #3.3 using the voting platform. Please record your vote. [Voting]

We then move on to ordinary Resolution #3.4, utilization to assign document strategic effect to resolutions. I propose Resolution that any 1 Director of the company and of the group company can be and are hereby authorized to do all such and sign all such documents and take all such actions as they consider selling to the effect to all the ordinary and special resolutions set out in this meeting year. We'll now vote on ordinary resolution #4 using the voting platform. Please record your vote. [Voting]

We now move on to the nonbinding In accordance with the code of [indiscernible] shareholder's approval for the company's remuneration policy and implementation thereof by way of separating nonbinding vote. The nonbinding votes enable shows to express their view on the company's remuneration policy thereof. Nonbanking adversary #5.1. I propose #5.1 the company's remuneration policy and by approved by nonbinding as a alive as regretted in Q4. We now vote on the #5.1 using voting platform. Please record your vote. Nonbinding #5.2, I propose anterior an implementation of the company's remuneration policy approved by way of a nonbinding advisory vote by in Q4. We will now move in the voting platform. Please record your vote. In the event that the remuneration policy or the remuneration report of Board have been voted against 55% or more of the voting rights in the nonbinding advisory vote. The Board will engaged with the majority shareholders to address and consolidate the objections and to emulate the policy and the report is appropriate technical concerns of the feedback and proposals resulting from the engagement and as approved by the Board. We now move on to the special resolutions. Special resolution #1. In relation to able to nonexecutive directors and the Chairman. I propose special resolution #1, the 66-8 and 66-9 of the Company's Act and on the recommendation of the Human Resource and Management Committee. The company wishes to and of the Board for services and cash and are paying any fees related to the with specific increases as we shared on Page 4y of the notice of the meeting. Provided above mentioned authorities and the AGM of the company in 2025. Special Resolution 1.1. I propose special Resolution #1.1 personalization number the determination of the Chairman's board fees and the board members approved by way of a special resolution of the shareholders in terms of Section 9 of the Company's Act. We'll now vote on special resolutin #1.1 using the voting platform. Please record your vote. Special resolution #1.2, that the explanation of the lead independent board member fee is hereby approved by a way of special resolution of the shareholders in terms of Section 669 of Company's Act. We'll now vote for on special resolution #1.2 using the voting platform. Please record your vote. [Voting]

I propose special resolution #1.3 and the of the Audit Committee Chairman fees and the committee member fee is hereby approved by way of a special resolution of shareholders in terms of section of the compensate. We'll now vote on special resolution #1.3 using the voting platform. Please record your vote. special resolution solution #1.4. I propose special resolution #1.4 the of the Human Resources and remuneration renovation committee and committee members back reached by resolution of the shareholders in terms of the Company's Act. We'll now vote special resolution #1.4 using the voting platform. Please record your vote. special resolution 1.5. I propose special resolution #1.5 as of the relations and committee Chairman fees and commitment is thereby approved by way of special resolution of the shower capital section in line of the Company Act. We're now vote on special resolution #1.5 using the voting platform. Please record your vote. [Voting]

Special resolution 1.6. I propose special resolution 1.6, of the risk, compliance and IT governance chairman fees and committee member fees hereby approved by way of a special resolution of shareholders in terms of the Companies Act. We'll now vote on special solution 1.6 using the voting platform. Please record your vote. special resolution 1.7. I propose special resolution #1.7, a of the Investment Committee chair, Charming fees and Committee member fess hereby approved by way of a special resolution of shareholders We'll now vote on special resolution 1.7 using voting platform. Please record your vote. Special resolution 1.8. I propose special resolution #1.8, that insemination of the Clinical Committee Chairman fees and committee fees hereby approved by special resolution of the shareholders of the Company's Act. We'll now vote on special resolution #1.8 using the voting platform. Please record your vote. Special resolution 1.9, I propose special resolution #1.9 of the Social Ethics and Transformation Committee Chairman fees and committee member fees is hereby approved by wayf of special resolution evolution of the shareholders of the company's act. We'll now vote on special resolution #1.9 using voting platform. Please record your vote. Special resolution #1.10. I propose special resolution #1.10 that's the determination of the adhoc material board and is hereby approved by special resolution of the shareholder's of the Company's Act. We'll now vote on special resolution #1.10 using the voting platform. Please record your vote. We now move on to special resolution #2, [indiscernible] for subscription of securities. I propose special solution #2. Result is a special resolution in terms of the Company's Act by the provisions by the any director assistant as contemplated for the Company Act to anyone or more related to person of the company for the people of in connection with the subscription of or any securities issued or to be issued by the company or a later on treated company or for the of any of the company or related company, subject provision at 8 in the notice of the meeting. We are now vote special resolution #2 using the voting platform. Please record your vote. Special resolution #3 authority to repurchase shares. I propose special resolution #3 resolved as a special resolution in terms of the company's act that subject to compliance with the requirements, the company's Act and the MOI of the company, the director hereby authorized in a discussion to inspect that the company or subsidiaries of the company acquired where we ordinary shares issued by the company, subject to the position at out of this line in notice of the meeting. We now vote on special resolution #3 using the voting platform. Please record your vote. Once we have voted on special resolution #3, the resolutions have been completed in metrics actually. Ladies and gentlemen, as mentioned before, please cast your votes and click on Submit button. I'll give you a few more seconds to do that. [Voting]

The poll is closed. The results of voting are displayed on the screen. You can notice that all the resolutions have been touched with the exception of the nonbinding advisory resolution #5.1, approval of the company situation policy, also the nonbinding advisory resolution #5.2, the approval of the company's implementation report. As mentioned before, as there is a vote of more than 25% against the company's remuneration policy and prevention reports there will be engagement with shareholders to address their concerns. Before closing the mid-teen shareholders, we quietly announced that revenue will be the down on the bottom of the AGM. I wish to formally thank you for your service to the company. The contribution spent many years both as executive director and non-executive and we have been truly to have you set on efforts. Thank you very much, Royden, and we wish you for the meeting. I now declare the meeting closed, and we'll move to the general Q&A section. We are now under general any questions. Any questions?

We do have a question.

The question is, can we answer the questions. Yes, you can ask questions now.

All right. Good morning. This is from I'm the ESG analyst. I just have a question to the board. It seems to offset the marketplace Life Healthcare for its current group structure, partly given the lack of synergies between the U.K. and SA operations. Has the board given any thought to the current structure and can you share any insights you may have deliberated to address the group structure and current low valuation attributed to the Life Healthcare?

Thank you, Chairman. Thank you, Damco. We see 3 components of our business as both structurally sound and very important assets. In the context of our Life Healthcare, we have a South African hospital business. We are the largest independent private provider of diagnostic imaging and new medicine services in Europe and we have a very exciting asset in Life Molecular Imaging, which is core to the care pathway for the treatment of Alzheimer's disease, as you may have read in the press. We see all of these assets as valuable and we see all of these assets is particularly well run. The speculation in November has, of course, raised shareholder questions around the independent values of these assets and as we recorded in our results presentation during the course of November last year, we said that our responsibility as management and the Board is to make sure that these assets continue to be run well and run effectively. In the context of value that's been attributed to the individual component parts of the business, we see the assets as being valuable. And -- of course -- of course, we, as respond by the executives will entertain conversations where other interested parties feel that the value ascribed to these assets is worth a conversation -- in the contest of realizing it's important to understand 6 months our agreements to go out and sell these assets but it is our responsibility to take in conversations that may arise seriously. Sorry, Mr. Moderator, can you hear us?

Yes, Chair, we can hear you. Video seems to have cut out. And then just apologies. We were jus sorting out some technical issues.

Moderator, can you hear us? Perhaps I will recommence my answer to Nance's question from the beginning. I'm not sure at what particular point we lost connectivity.

We could hear you. We just could not see you. So it has been answered.

Is there any other question?

There's been no questions.

This meeting is concluded and, and I thank you for attending. Thank you very much.