Good day, ladies and gentlemen, and welcome to the Healthcare Interim results presentation. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If you should require operator assistance during the conference, please press Star and then zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Peter Wharton-Hood. Please go ahead, sir.
Good morning, ladies and gentlemen, and welcome to Life Healthcare's interim results presentation for the six months ended 31 March. Before I dive into the detail, perhaps a very high-level overview of what our focus has been for the last six months and will continue to be going forward. Our business is clearly about driving volumes and operational excellence. We acknowledge that we're in a very competitive market. We see the introduction of new competitors, if not on a monthly basis, extra beds being added into acute hospital care across the regions in which we operate. We have very little growth in insured lives, as to be expected, and pressure on tariffs and underlying costs. In the face of that, we have adopted a very clear strategy internally, to set ourselves to become the most efficient hospital provider in terms of risk-adjusted cost per event.
In order to deliver this, we introducing value-based care measures across our hospitals to contain the costs of an admission, and we are using innovative contracting reimbursement models. We believe that this will result in Life Healthcare being the preferred hospital group with good occupancy levels. The delivery of the strategy may have a short-term impact on our revenue per PPD growth. We believe, as is always the focus, that our margins for the full year will be broadly in line with, with the prior year, as our cost-saving initiatives come into effect, and this may result in a slight improvement in margins going forward. But we'll make sure that this is done on a sustainable basis.
If we have a look at the highlights, clearly, the announcement of the full reimbursement for Neuraceq in the United States captured the headlines, both locally for Life Healthcare and internationally for Alzheimer's patient sufferers. You'll see a significant increase in Neuraceq doses sold, rising just above 74%, which is a welcome impetus to the strategy that we have been talking about for the past three years. On non-hospital, non-acute-based strategic delivery, we can see that you can see that we've now concluded the acquisition of the renal business previously held by FMC. On the domestic front, a very commendable growth in PPDs, up 2.7%, and a highly commendable growth in revenue of 7.8%. As Pieter will explain later, we're also delighted to be able to increase the interim dividend to shareholders by a shade less than 12%. We look...
If we look at the outlook statement that we had for 2024 and mark our homework and the progress thereof, we said we'd increase occupancies. They've risen from 65.9% to 67%, and as we'll hear later on, current occupancies in our hospitals as of yesterday are as high as 74%. We were targeting a PPD growth of circa 3%, and you'll see acute has come in at 2.7% for the half year, and for all the complexes at 2.3%. We said we would grow our non-acute services and therefore delighted to report the conclusion of the FMC deal and an imaging deal in progress at Life Hilton Private Hospital.
In growing intensive care unit beds to meet the high acuity demand, we have in plans are in progress with 59 ICU and high care beds that will continue to be added to the complexes over the remainder of this year and early of next year. We said we'd maintain EBITDA margin. Our Quarter 2 margin is at just above 17%. Our Quarter 1 margin was a disappointment, which we'll explain later on. We said we'd focus on reducing costs. There are clear initiatives in progress with the formal processes through our head office and the consolidation of regions already announced to staff. On the Life Molecular Imaging front, we said we'd increase commercial sales, and we've had a 110% increase in the commercial sales component of overall doses of Neuraceq sold.
We strengthened the U.S. commercial organization, and we have reorganized the U.S. team with a solely sales focus and highly experienced executives in charge thereof. We said we'd invest in equipment for Neuraceq manufacturing in the U.S.. We spent just short of $1 million making sure that that happened, and we'd continue to invest in the Tau tracer product and have done so. As far as the group was concerned, our tasks were to conclude the AMG disposal, which, as you all know, has been done. We said we'd optimize the cost base, and as I've already highlighted, those formal procedures are already in progress. And we said we'd make a, the special dividend distribution to shareholders, and that was paid on the 8th of April of this year. As an overall look at our company, it is simpler post the disposal of Alliance Medical Group.
In Southern Africa, we have acute hospitals covering 63 hospital facilities in SA over 8,000 hospital beds. We also have non-acute operations through mental health, rehabilitation, renal, oncology, imaging, and our public-private partnership with government and our employer-based on-site healthcare services through LHS. So Southern Africa is easy for us to be able to explain and understand, while complex to operate and implement. Internationally, our focus is on Neuraceq. The slide shows an emphasis on the 49 active and contracted third-party manufacturing sites around the world for Neuraceq. But in essence, when one looks at Life Molecular, its sales of Neuraceq, it has an exciting portfolio of assets under development, and it also has a services function providing pharmaceutical and radiopharmacy services to some of the biggest pharmaceutical companies in the world.
When we look at how that strategy breaks down in work that we have to do, clearly growing and restructuring our network of facilities is of the most importance and has highest impact on revenue. Our concentration on value-based contracting, which requires experienced people, sophisticated systems, and a significant investment in IP, which has already been made, has taken place and continues to take place in order to make this a competitive advantage for the company. We think that it'll make us the leading efficient healthcare provider with innovative opportunities around contracting and reimbursement across our integrated care models. The expansion into complementary services we've been speaking about for a long time.
It's taken years in the making, with a significant level of experience inside the executive around deal-making and the seeking of opportunities, and you can see in the boxes thereunder, that it's not limited to narrow portfolio, but rather the broader portfolio about which we've been speaking. None of this happens without operational efficiencies, and that is where the Life Healthcare executive is now being put to the test through operations, procurement, and the analysis of our corporate and regional overheads. We're proud of our capabilities and enablers. We have a strong property portfolio, correctly positioned and not overcapitalized. We have a fortress balance sheet with the lowest gearing ratio in the history of the company. We have a cohort of skilled, very experienced, and compassionate people.
We have years of investment in data and analytics, which is now coming to the fore, particularly in operationalizing our network deals and in establishing the price points in value-based care. Our clinical excellence ranks unsurpassed. We have strong doctor relationships, and we're proud of being the preferred network hospital provider in South Africa. What does that mean when we turn to our numbers? During the six months under review, revenue grew by 5.9%. Normalized EBITDA, which we report there, down 4.6%, but as we'll see later on, we have to take into account the split in public holidays between FY 2023, where the Easter holidays were located in a different month to FY 2024, and we'll show you that analysis later on. South African revenue at a touch over ZAR 11 billion, of half...
of H1 occupancies of 67% are a result of a PPD growth of 2.3%. Revenue growth across the acute businesses was, however, impacted by the case mix. You will appreciate that we can't control the case mix that arrives in our hospitals. The mix between surgical and medical, particularly as these network deals bed down, will have to normalize over time. Our complementary services business was driven by good growth in renal dialysis and imaging, with strong performances from Life Nkanyisa and an improving performance from our Life Health Solutions business. Q1 remained a worry for us. We identified the impact of higher operating costs and lower-than-expected activities in Q1, which were immediately addressed, and the number of efficiency initiatives implemented thereof led to a stronger Q2 performance. We look at our acute hospitals, occupancies at 66.6% for the half.
Our combined Q1 and Q2 occupancies showing 69.3, and as I alluded to earlier, occupancies across our complexes now in the early 70s, and our monthly occupancy showing improving trends all along as a direct result of our network deals. Revenue growth of 5.5% across the acute hospitals, off a PPD growth of 2.7% and a revenue per PPD of 2.8%. Occupancies, a good performance in Q2. The PPD growth was good on an underlying basis, but impacted by the quiet first quarter. And our revenue per PPD, whilst we experienced or received above CPI tariff increases, the negative case mix hampered that advancement. In the complementary services arena, mental health and acute rehabilitation occupancy up to in the early 70s.
Renal dialysis treatments, just over 100,000, and our growth in imaging volumes exceeded 21,000 for the first time. The revenue was therefore driven by good growth in renal dialysis and imaging. Occupancy showed an improvement in Q2 from a mental health business perspective at just over 76%, and again, the Q1 performance was slow. Renal dialysis and our imaging businesses were all benefited from the deals that have been done and improvement in operations. To round out the detail on the FMC acquisition, it was approved by the Competition Commission. It was only operationalized on the first of April, so outside of these results. We announced a cash consideration payment of ZAR 367 million for the South African business, so it's broadened our countrywide footprint, expanded our patient base, and the emphasis is now on operationalizing this acquisition and integrating it efficiently.
It takes the total number of units that we now have in the renal dialysis modality at 74. 1,145 renal dialysis stations, circa 4,000 patients, and annual treatments of just over half a million. A great acquisition for Life Healthcare. In order to look at some of the disturbance caused by the shift in the public holidays, it's important for us to see how we're doing in the seven months to the end of April. Revenue is up 7.6% for the comparable seven-month period. Normalized EBITDA, more or less in line with the prior period.
But please cast your eyes to the bottom left-hand side of the slide, where we can see that the EBITDA margin for March and April combined for 2024 comes in at 17.5%, compared to 18.6% for the same two-month period in the prior year, which shows that the initiatives around margin management are certainly taking hold in the latter half of the six months under review. Occupancies, we've spoken about, and the improvement on PPD growth, occupancies, and margin improvement for the seven months are there to see. In talking about Life Molecular Imaging, Life Molecular Imaging sales in US dollars, just over $27 million for the half. Neuraceq volumes at just over 8,500. It's important to understand this business in its component parts.
The core activities on which we're focusing the executive and the management on the commercial sales of Neuraceq. We also have a highly sophisticated and well-established research and development portfolio, in which we are actively engaging in optimizing the value that can be derived from five promising assets in that portfolio, two of which are in the late stage of clinical development. The optimization of value in that particular portfolio may be a combination of partnerships, third-party equity, or continuation of the existing strategy for the products that we have in hand. That is under review. From an R&D services perspective, we supply PET tracers for research projects and also provide expert services, services that are in high demand, and round out the value proposition that is held within LMI and why it is such a valuable asset for us.
When we look into the crystal ball, the question that we do get asked is: What are the prospects for the sales of Neuraceq? The executive will concede that the development in volume growth there is largely beyond our control. It's a product that is bought, not necessarily sold, and our responsibility has been to put the right people and the right platform and the right manufacturing arrangements in place in the United States, principally, in order to make sure that we are there to be able to supply the product as required and as the demand increases. Listed before you are the monthly volumes in Neuraceq that have been sold through the US and non-US components of the business.
In order to have some idea as to where this is headed before the full year results are struck, depending on which trend line we choose to observe, we think that we can probably get this to somewhere between 2,700 and 3,000 doses per month within the next six months. That, of course, comes with a health warning, that the delivery thereof is not solely within our control, and the evolution of the market, of which we're actively participating and monitoring, is key to the developmental success of this business. I'll now hand you over to Pieter for the more detailed financial review of the six months.
Thank you, Pete, and good morning, everyone. The first half had strong activity growth in Southern Africa on the back of the network arrangements concluded in January 2023, as well as the impact of the net 53 doctors we recruited in the last six months. The impact of the pricing of the networks and the case mix did, however, have a negative impact on the revenue per paid patient day. The pricing did have a more pronounced effect on the first quarter, and I'll explain that a bit later. The revenue for the first half in Southern Africa has grown by 5.9%, and the significant growth in the sales volumes of Neuraceq, with the resultant revenue growth in LMI of more than 70%, contributed to the group's revenue growth of 7.8%. Normalized EBITDA reduced by 2.8%.
The growth in revenue did not translate into a similar EBITDA growth due to the incremental revenue on the additional PPDs at lower than the incremental cost per activity due to the case mix change. This was more pronounced in the first quarter, when the EBITDA margin in Southern Africa was 13.4% compared to the comparative quarter of 15.7%. The margin did normalize, however, in the second quarter, where the margin was above 17%. The annualized impact of a network pricing, the effect of a cost management, and the continued growth in PPDs, we do expect margins in the H2 to be similar to that of H2 2023. The use of the AMG proceeds to reduce the debt resulted in the group's interest costs reducing significantly after the conclusion of the AMG disposal at the end of January.
This contributed that the normalized earnings for the group grew by 8.4%. The strong balance sheet with gearing post the payment of a special dividend is at 0.8 times net debt to EBITDA. And based on this, plus the growth in the normalized earnings per share, the board declared an interim dividend of ZAR 0.19, up 11.8%. Just in summary, the disposal of AMG was concluded in January of 2024. Due to the accounting treatment of this disposal, the numbers as presented just shows AMG as a one-liner, as a discontinued operation. So the income statement and balance sheet, and cash flow excludes all the movements from AMG and the comparators as well.
Over the two years, we've had to recognize a loss in the 2023 financial year, in the second half, and in this half we recognize a profit of ZAR 2.8 billion. The total profit on this transaction is ZAR 1.8 billion. Of the proceeds of ZAR 20 billion, we applied ZAR 9 billion to reduce the international debt. We paid transaction costs of ZAR 800 million, and then paid a special dividend to shareholders just after end of the second half, early April, of ZAR 8.8 billion. We did retain some funds for the growth opportunities. ZAR 367 million is already earmarked for FMC and was paid in April.
And then we've putting aside additional ZAR 53 million for the conclusion of the FMC transaction, what we expect in the second half when we acquire Eswatini business as well as the Namibian business. And then a combined investment of ZAR 960 million, roughly, is committed towards LMI. In terms of the profit and loss statement, few things I wanna highlight. The current period does have less trading days compared to last year due to the impact of Easter. But even with this, the PPDs group grew 2.7% . As stated, the top line growth is good, but this did not translate into an EBITDA growth. EBITDA is down 2.8%.
The depreciation charge also increased by 12.5%, mainly due to the result of the CapEx spend in the past year, as well as the impact of the acquisitions of the few imaging businesses we acquired in the second half of last year. The group did benefit from a reduction in interest costs post the settlement of debt, with the interest costs down almost ZAR 300 million. The monthly run rate on interest costs is currently approximately ZAR 50 million. On a segmental basis, the breakdown between Southern Africa margin and LMI is evident. The low activities, coupled with the impact of the networks relative to the cost base in Q1, resulted in the lower EBITDA margin for Q1. As stated, this margin was 13.2% relative to the margin in the prior period for the same quarter of 15.4%.
The margin for Q2 was above 17%. Corporate costs of ZAR 815 million grew by 6.8% against the prior year, and this increase is largely driven by the impact of IT spend that grew faster than inflation. The spend included above for IT is ZAR 257 million, and this was up 19% against the prior year. Earnings per share and headline earnings per share has been significantly up by more than 540% and 63% respectively. Both of these are, however, impacted by the disposal of AMG. The normalized earnings is a better reflection of earnings growth, and this grew by 8.4%, as evident on the slide.
On a statement of financial position, the group has a fortress balance sheet with net debt to EBITDA post a special distribution at 0.8x . One area of focus on the financial position statement is, however, our accounts receivable. The accounts receivable relative to the growth in revenue grew faster, and this is largely due to government-related debt in Southern Africa, and the impact of faster growth in LMI sales, where the terms are longer dated. We do expect these to recover in the second half. From a debt perspective, we have refinanced some of our debt maturing in the next 18 months through the issue of corporate bonds. These bonds were issued in early April, and all of these bonds were done at better margins than the debt maturing.
Our run rate for interest-bearing debt is now approximately ZAR 50 million per month. The weighted average cost of debt is around 7.3%. Total debt outstanding as at the end of April is ZAR 3.9 billion. Although the free cash flow is negative for the half, this is due to the timing of the CapEx spend, where we did spend some of our replacement CapEx and infrastructure CapEx earlier. This is expected to normalize during the year, as well as the accounts receivable that I discussed earlier. In terms of the total net cash, so the net cash movement for the half has been ZAR 9.5 billion positive. Of that ZAR 9.5 billion, the special dividend of ZAR 8.4 billion was paid just off the half year.
In terms of capital allocation, we are investing in a number of exciting growth opportunities. These are mainly brownfield expansions and will add roughly 105 beds in the acute business over the next two years, where we have identified growth, as well as the adding of 4 cath lab or vascular labs over the next two years. In terms of our CapEx commitments, the total capital commitment committed for 2024 is ZAR 2.1 billion in South Africa, of which ZAR 1.2 billion is for maintenance replacement related CapEx, ZAR 350 million for a property transaction that we expect to be concluded in the next six months, and then ZAR 590 million for brownfield opportunities.
We will spend approximately ZAR 200 million in LMI, of which approximately ZAR 100 million will be for R&D, and ZAR 100 million will be for replacement slash growth CapEx. The group has also declared and paid a special dividend just after the half year, and we have declared an interim dividend of up 11.8% to ZAR 0.19 per share. I'm gonna now hand you back to Pete to take you through the outlook.
Thanks, Pieter. Before I get to our outlook statement, perhaps a revisit as to the journey that we followed and where we find ourselves. I think you'll see through, particularly Peter's presentation, that our balance sheet has been significantly simplified. It's easy to understand, and it's easy to articulate where our advantages lie and what competitive advantages come from the way that we've been financially positioned. You'll also see from my opening statements that we have very clear lines of business between acute, non-acute, the support functions, and the international operations in LMI. In line with the strategy that we're pursuing, we also chose to revise our executive structures.
I've always been a strong proponent of very clear lines of accountability and ownership for outcomes, and in that revised executive structure, we've made it absolutely clear who's responsible for the growth opportunities and driving revenue across our platforms, be it acute, non-acute, or in the corporate finance space. The clear responsibilities around efficiency metrics, which executives are responsible for them, and what outcomes we are expecting. And across the support functions, it's quality service delivered at a price point that is competitive with external benchmarks. In terms of LMI, it's also particularly clear that the emphasis is on sales, but we mustn't leave those other two important components of LMI out of the spotlight in the asset portfolio that we seek to optimize and the R&D services, where we simply operate in a league of our own in Europe.
So together with the accountability and clear lines of ownership, we anticipate that the times ahead are likely to be tough, but the team has enough experience and enough cohesion to, I think, be able to deal with both the challenges and the opportunities that lie ahead. We've been asked a number of times what our position on the NHI is, particularly post the signing into law. We've always engaged constructively on the topic of NHI with our counterparts. We've made our position clear. We unequivocally support the outcomes visualized by the Act: quality service, quality healthcare services for all.
In focusing on our engagement, it will be around helping to ensure a sensible introduction of NHI, and that any expansion or expanding access to healthcare is achieved sustainably with no compromise to the healthcare delivery platform or harm to the entire healthcare system. This position remains unchanged. We do, however, have a view that the approval of the bill without addressing the concerns that were raised during the parliamentary process is a missed opportunity. Had we been listened to, it would have helped to expand sustainable access to healthcare. We therefore think that as a result of not being heard, the implementation journey of NHI, due to the operational and legislative requirements underpinning it, will take a long time. This, in addition to the significant fiscal constraints.
The proposed healthcare reform decisions will profoundly impact the sustainability of South Africa's health system for generations to come. We, as Life Healthcare, as a significant healthcare provider, providing the highest standards of private healthcare, will continue to contribute meaningfully to the envisaged legislative reforms of the Act. We, of course, are monitoring the developments and the related legislation, and we will explore all opportunities to ensure the sustainability of our industry. In summary, our commitment lies in acting in the best interests of our doctors, our nurses, our current and future patients. And I repeat that to make it absolutely clear: Life Healthcare's commitment lies in acting in the best interests of our doctors... our nurses, our current and future patients. For the remainder of 2024, we envisage occupancies at or marginally above 70%. We're targeting a PPD growth of around 2%.
We will continue to improve our EBITDA margin from that posted for the first half of 2024. There will be a continued and detailed focus on operational and cost efficiencies. There will be a continued emphasis on the development of our non-acute business opportunities. In that regard, additional imaging transactions are already underway, and we will finalize the FMC renal acquisition for the portions outside of South Africa and operationalize and integrate all the stations and units acquired. Internationally, the focus is clear: we will increase the commercial sales of Neuraceq. And with that, ladies and gentlemen, we will now take questions.
Thank you, sir. Ladies and gentlemen, if you'd like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate that a line is in the question queue. You may press star and then two to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up your handset before making your selection. For the benefit of the participants who have connected via the webcast, you're welcome to pose your questions in the question box provided on your screen. At this stage, we have no questions from the telephone lines. I will now hand over the questions from the webcast.
One comes from Alex: How exactly are you gonna cut costs, and how many heads will go? Alex, as I alluded to earlier, the formal processes have started. For those listeners from international jurisdictions, South Africa is governed by the rules of Section 189. We've had a high-level review of our regional and head office cost structures. With that in mind, we've communicated to affected staff that it's our intention to make these run more efficiently, and the consultation process has already been initiated. All our South African listeners will understand that in the context of consultation, we have to take the considered input from affected employees first before we can make decisions as to exactly how we will implement those particular initiatives.
So regrettably, Alex, I can't answer the second question yet as to... You said, "How many heads will go?" At this particular point in time, the consultation process is underway. We will update the market as and when those decisions are taken. Adriaan from Moneyweb has said: How will NHI impact on Life Healthcare from a shareholder point of view? Adriaan, it's quite clear our focus has got to be on what's good for our doctors, our nurses, and our patients, as, as I had repeated during the course of the presentation. From a shareholder perspective, your primary concern is what dividends will be returned to shareholders. And in so doing, the question you're asking is, how will NHI impact on the delivery of private healthcare services in South Africa?
In the context of where we're seeing the implementation of NHI, it's the government's ambition statement to make it yeah, quality service, quality healthcare services accessible by all. And the primary focus of that is actually the delivery of primary healthcare in remote and difficult to access places, possibly nurse-led and definitely clinic-based. So the immediate impact on private healthcare providers in acute hospital settings, I foresee as being relatively limited in the medium term, if at all. So in the context of how we're running the business, we have two tasks. One is we keep our heads down, and we keep delivering on the responsibilities, which we've already outlined in today's presentation.
And secondly, we keep a watching brief over developments in legislation to ensure that the implementation or whatever's proposed is done in the best interests of doctors, nurses, and patients. I don't foresee any impact on the business in the medium term. In the medium to longer term, I do believe through collaboration, private healthcare has a significant role to play in the overall delivery of the government's ambition. With that in mind, I think that the utilization of spare capacity across our complexes must come into consideration, and I think through constructive engagement with government and sensible commercial arrangements, real working partnerships can be established that utilize the skills, capacity, and capabilities of the private healthcare in order to improve the delivery of healthcare across our nation.
I will answer this one question in terms of there's capital commitment of close to a billion rand for LMI, but we're only committing ZAR 200 million in the current year. The ZAR 200 million referred to is a CapEx commitment, and there's also. It's running at a small loss, so we will contribute towards that loss from a funding perspective, but the total billion rand is earmarked over a couple of more than one year. We do expect LMI to turn positive in the next two to three years.
Sikonathi from News24 has asked me to repeat what I said about Parliament not having listened to us through the consultation process, and had we been listened to. During the course of the consultation process, Life Healthcare made a strong statement that the delivery of NHI over the decades that it will take, should be on a milestones-based approach and not contemplated as being successful or remotely successful just through the implementation or the signing of legislation. So in the context of our detailed conversations to Parliament, we said that the building blocks of an efficient and accessible healthcare system rested on more nurses, more doctors, and more capable hospital managers to manage the varied and difficult healthcare complexes across the country.
So in summary, what we're saying is, in order to get this right, we've got to get the basics right, and it's less about legislation, it's more around operational management and getting those building blocks in place first. We also made a strong statement about the significant operational risk that would come from running a centralized fund and a single point of failure in the centralized fund. We don't believe on a risk-adjusted basis is the correct way to anticipate running the funding mechanism. So I hope in a very brief statement, that's answered your question.
I think, Peter, all the... Most of the questions relates to the NHI that we've addressed, as well as the head office restructuring, but I think we've addressed in terms of what we can say, so I don't think there's any further questions on the call.
Super. Thank you very much, Pieter. Unless there's any other further questions that want to be raised?
On the line, Judith?
On the line.
Confirmed there are no further questions on the line, sir. Thank you.
It remains. Thank you very much for your attendance, and, and, I wish you a good day. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.