South Africa's Life Healthcare plans Poland exit
Regulatory changes resulted in an impairment in the value of its Polish investment.
Private hospital group Life Healthcare is exploring an exit from Poland after taking a multi-million rand impairment charge during its financial year to end-September.
In Poland, Life Healthcare owns the Scanmed hospital group and provides diagnostic services through Alliance Medical. The company acquired a majority stake in Scanmed in 2014. Life Healthcare said on Thursday it was exploring strategic options for a potential exit from this market.
Regulatory changes in Poland affected minimum employments costs and resulted in an impairment in the value of its Polish investment of R125 million.
Scanmed relies heavily on contracts from the Narodowy Fundusz Zdrowia (NFZ), the National Health Fund of Poland. However, regulatory changes in 2017 have led to tariff reductions, which were material in cardiology. This hit Life Healthcare’s Scanmed as the business is more than 30 percent cardiology based, and tariff changes have driven a circa 28 percent decline in cardiology revenue in 2017.
Group revenue rose 9.3 percent to R25.7 billion, with revenue in Southern Africa growing 7.1 percent to R18.5 billion, and international revenue 12.1 percent to R6.9 billion. In South Africa, the company had benefited from doctor recruitment gains in the past two years, network gains, and increased acuity from surgical cases, it said.
The company has recently exited its Indian operations, using the proceeds to reduce debt. Like its domestic peers, Life Healthcare had taken on debt in recent years to pursue offshore opportunities amid a tepid local environment.