Life Healthcare Group Holdings Limited

Life Healthcare reported 2025 continuing revenue growth of 6%, normalized EPS growth of just above 10% (reported as 10.1% on a pro forma basis), and cash generation of 119.6% of EBITDA. Occupancy for the year was 69.7%, with 69.2% cited in the operational review; PPD growth was 1.1% overall, revenue per PPD grew 5.8%, and acute EBITDA margins were flat year over year. The group also reported ROCE of 17.8% and net debt-to-EBITDA of 0.77 including IFRS lease liabilities. On capital returns, the final dividend increased 12% to ZAR 0.56 per share, and management said total dividends for the year were just over ZAR 2.81 per share including the special dividend. Looking ahead to FY2026, management expects occupancy at 70%, PPD growth of 1%, revenue growth of 5%, about 140 additional specialist doctors, another 89 acute beds, 40 acute rehabilitation beds, 20 renal stations, 3 PET-CT sites, and commencement of commercial production in the cyclotrons. They also expect ZAR 400 million of real cost savings over the next 3 years.

Peter Wharton-Hood framed the year as operationally strong and strategically clearer, with the company now focused on “where we grow, what we drive and what we seek to optimize.” He highlighted the core hospital business, higher occupancy, specialist recruitment, and expansion projects like the 140-bed Life Paarl Valley site, while also stressing that underperforming assets will be actively fixed through relocation, consolidation, rightsizing or closure. His tone was confident but candid that the optimization work is difficult and not yet complete.

Pieter Van Der Westhuizen focused on the accounting and financial impact of the LMI sale, saying the transaction was just north of $750 million with $355 million received upfront, net proceeds of roughly $200 million after costs and provisions, and potential earn-outs of up to $400 million through 2034. He said the profit on disposal was ZAR 2.4 billion, while the Piramal liability of ZAR 2.9 billion remains in continuing operations; he also noted ZAR 211 million of impairments, mostly in Fresenius, and a ZAR 54 million profit on the Eastern Cape hospital sale. On cash and capital allocation, he cited cash generated from operations close to ZAR 4.6 billion, free cash flow at 36.5%, special dividends totaling ZAR 4.4 billion during the current year, and capex of about ZAR 1.3 billion for maintenance/infrastructure plus close to ZAR 450 million of growth capex. He said net debt-to-EBITDA would be close to 0.8 if the Piramal liability is treated as debt-like, and management is comfortable at that level.

Analysts pressed management on the timing and execution of the ZAR 400 million cost-savings target, the economics of the underperforming hospitals outside the top 30, margin guidance, and whether wage inflation can stay below revenue growth. Management said 20% to 25% of the savings target should come in the first year, with the remainder depending on how quickly projects are operationalized, and explained that some sites can be consolidated through license and bed reallocations rather than new construction. They also said the underperforming units can be improved by relocation, adding subspecialties, or rightsizing, and acknowledged that labor inflation is a challenge, though tariff negotiations should help keep wage growth close to tariffs. On margins, management said improvement is expected across both underperforming and top-performing hospitals, and later clarified that renal EBITDA margin is targeted to recover to 15% to 18% from a current single-digit level after the FMC integration issues are corrected.