Good day, ladies and gentlemen, and welcome to the Life Healthcare unaudited group interim results for the six months ended 31 March 2025 and the cash dividend situation. This time, obviously, I'm in listen-only mode. You should reply after I do assistance during the call. Please press star and then one on your telephone keypad. If you're in another session, we'll follow the formal presentation. At this time, you may key in star and then one while you touch your phone or the keypad on your screen. For the benefit of participants who are connected via the webcast, you're welcome to pose your written questions in the question box provided on your screen. Please note, this conference is being recorded. I will now turn the conference over to the CEO, Mr. Peter Wharton-Hood. Please go ahead, sir.
Good morning, ladies and gentlemen, and welcome to our results presentation. I'm joined in Johannesburg with my two colleagues, Pieter van der Westhuizen and Adam Pyle, and we'll jump straight into the review of the six-month performance. I think in a highlight sense, we could move straight to the PPD growth, which we feel we predicted and are proud to report was up 2% during the period under review. Occupancy is on track to get to the 70% that we're also targeting. Overall revenue growth of 8.1% during what was quite a difficult period. Our hospitals, EBITDA up 8.2%. Normalized earnings per share, which Pieter will go through a little bit later on because it's important to understand how we got to that, up 9.1%. An interim dividend continuing our positive return of cash to shareholders up 10.5% and 21 cents per share.
If I look at the progress that we made during the first half of 2025, we gave some undertakings at the end of the last financial year. We've added 20 ICU beds, another 62 beds expected in the second half. The Life Paarl Valley Hospital will be under construction in the second half of this year, and we completed a further imaging transaction. In the drive category, the PPD growth of 2% is a result of, I think, three years of effort in rearranging our business and our relationships with funders and doctors to get to more activity in our hospitals. The resultant increase in occupancy to 68.6% is on track to hit the optimal 70%. From the optimization perspective, we know that in the context of how our business is starting to be presented, it is far simpler.
In the context of extracting further value, we will have to look at those underperforming assets, which are on the radar chart and are under review. We'll get better at controlling our overheads. We have some efficiency initiatives underway, particularly in the head office. The acquisition of the renal dialysis units is in progress, and we've got a further two value-based care products in the pipeline. From a strategy perspective, I think that we will now start repeating this in our engagements with shareholders. We know that, and we want to hold ourselves out to be with an unchanged strategy for some time. We think we are in the growth phase. We will grow our footprint in strategic locations, greenfield, like the Life Paarl Valley Hospital. Excitingly, there are a number of brownfield expansion opportunities to our existing facilities.
In an earlier call this morning, the reason why we are in favor of these brownfield expansion opportunities is we know that the minute we have cut the red tape and opened the facilities, they fill up very, very quickly within days, if not a couple of weeks. There is clearly demand in certain areas, and we will definitely tap into them. The acquisition of new facilities, given our strong balance sheet, is always within our radar. The expansion of the complementary lines of business, which we commenced about five years ago, will continue. In the drive category, it is all around making sure that our facilities are increasingly utilized. The general practitioner channel is one of our most important referral channels to our key specialists, and that will continue to be optimized. Our emergency unit channel continues to grow.
Doctor recruitment and the retention of our key customers, being our doctors, is an incredibly important management initiative, which continues. You will see later on that we recruited a further 71 doctors during the six months. Funders and our network arrangements, very, very important. Of course, the value-based care and integrated care products are an important offering to our funders. In the optimization category, and this is not a road that lasts forever, we know that we have to optimize our assets that are underutilized or underperforming. There are a variety of initiatives in different shapes and forms underway to deliver that. Streamlining business operations with a largely simplified business that is presented to you today, post all the corporate finance activity that has taken place over the last three years, it is now important to show that a streamlined business operates very, very effectively and reliably.
Underpinning all of that will be the constant revisit of our mantra on capital allocation, justifying where the money gets spent, and of course, the money that gets returned to shareholders. The capabilities that underpin all of the strategy remain unchanged. We see our footprint as a key strength. The strong balance sheet will keep repeating as to why we believe that that puts us in a competitive position. The heart of the business is our compassionate people. Then the refinement of our strategy through the use of technology and data, the constant focus on clinical excellence, and of course, our relationship with doctors, rounds out a strategy which I think is now very clear and easy to understand. The magic is in its execution.
If one looks at the overall footprint that we've now, that we will constantly be repeating, the acute hospitals, emergency units, and day facilities make up the core of our business, supplemented by our mental health, physical rehabilitation, and renal dialysis businesses. Of course, the radiopharmaceutical headline there takes us into the imaging space, which has got a long runway and lots more to do, particularly in the nuclear medicine and the expansion of our imaging sites. Our oncology business has also commenced and got some traction, but also has a long way to go. Life Nkanyisa is in the spotlight. You'll notice that we have had some contractual challenges, but we also know how important that business is both to Life Healthcare and society, so it remains very firmly in focus.
Our Life Health Solutions business also needs to be optimized through the acquisition of more contracts with customers. From an operational perspective, we can see that the revenue by segment continues to improve. Our focus on complementary services has paid off, and the good revenue growth in the hospitals is certainly one that we are pleased to report. Occupancy improvement continues. The doctor recruitment emphasis continues, and the improvement in operational margins is the result of years of work and is not yet finished. Our growth plans to selectively broaden the footprint, I have explained in our expansion ambitions, and the optimization of underlying portfolio assets continues with the recent disposal of Life St. Mary's in Mthatha. The excellent working capital management underpins the essence of our organization so that our cash generation is a higher percentage of the EBITDA generated.
As we can see, it's regrettable that we lost some contracts in Life Nkanyisa, but we are firmly in play to recover some of that over the next six months. When it looks at the acute hospitals, the occupancy improvement is also as a result of years of work in the quarterly occupancy trend in the top right-hand part of the slide. It epitomizes exactly what we want to see happen. Our occupancy at 68.3% is not yet the 70%, but can recall that we were pretty close to the activity levels in the pre-COVID era of 2019, which shows that our promise to sweat the assets continues to be delivered upon. ICU occupancy relies that in our brownfield expansion opportunities, they're largely ICU beds, and you can see that level of occupancy easily justifies further expansion in that particular capacity across the hospitals.
The PPD growth of 2% was slightly ahead of internal expectations and a positive trend that we're capitalizing upon. The rest of the activity levels inside the hospital are in line with that growth. The overall revenue growth of 7.9% was ahead of the tariff increases granted by the funders and reflects the improvement in activity levels in the hospitals, with the normalized EBITDA improving ahead of the revenue growth. Year-to-date April 2025, bearing in mind that the first six months was flattered by the move in the calendar and the public holidays, the PPD growth is at 1.2% and occupancy levels at 68.3%, which is completely understandable given that the shift in the Easter holidays moved into April during the course of 2025.
Importantly, if you compare the occupancies to the prior year, we're now at 68.3% versus 66.9% for the first seven months of this financial year. The complementary services scorecard records a healthy result. Be careful of looking at the big numbers in renal dialysis. That's, of course, distorted by the acquisition. The like-for-like increase at 7.3% is a more realistic reflection of underlying volume growth. The improvement in normalized EBITDA in the complementary services realm clearly shows that our ambition statement to grow them was correct, and its health contribution to earnings we think will continue. Again, not to underestimate the impact of the shift in the public holidays, reflect on the year-to-date April 2025 growth, where PPD growth is at 2.4% and occupancy levels a healthy 71.8% compared to the prior year's 70.4%.
With that, I will hand you over to Pieter van der Westhuizen , who will start with the Life Molecular Imaging transaction review.
Good morning, ladies and gentlemen. In terms of LMI or Life Molecular Imaging, the transaction is now in the final stages of being closed up. We received shareholder approval in early April, and the key outstanding matter or closing condition is now the South African Reserve Bank approval. We do expect this transaction to be closed out in our second half of our financial year. We've announced an LMI transaction in January with an initial upfront payment of $350 million and potential further milestone payments of up to $400 million. Unfortunately, from an accounting perspective, our transaction will be spanning out. We would need to recognize the liabilities associated with the transaction, but we cannot recognize the profit on disposal until the transaction closes. On this slide, we demonstrate that we estimate a net profit on disposal of approximately ZAR 2.8 billion.
We have to recognize at this stage liabilities of ZAR 2.9 billion in the first half. Therefore, in the second half, we will have the profit coming through of estimated about ZAR 5.7 billion. Also, just to reconfirm, when the transaction closes and the cash flows, we will distribute a bulk of the proceeds back to shareholders. In terms of the highlights of the financial results, good revenue growth driven by good activity growth in Southern Africa, as well as a reasonable tariff that we got from a medical aid from January. We expanded operational margins on a life-for-life basis across the board, other than in healthcare services, due to operational leverage in the hospital business, but also good cost management. Strong cash generated from operations benefited from good trading results, but also exceptional good working capital management in this half compared to last year.
Return on capital employed is at this half, 17.5%. On a like-for-like basis, last year, improvement from last year, that was around 17%. We will declare a dividend up 10.5% interim dividend of, and I'll come back to that slide just later. On the income statement, revenue up 8.1%. We have stripped out on this slide the pro forma adjustments related to the fair value adjustment for LMI that's included in the results, the ZAR 2.9 billion that I previously spoke to. Operating profit up 7.5%, and then profit before tax up 2.4%. Included in these results is an incentive charge. If you remember correctly, at the end of last year, LMI did a tremendous second half driven by the RM2 transaction, and that RM2 transaction had an impact on the incentives, longer-term incentives, and that then had the result of the first half not being comparable against last year.
On a year-to-date basis, at the end of a financial year, it will normalize, and you will see that incentives will normalize against prior year. Total triple-till profit on a like-for-like basis. Also, last year, we had the disposal of AMG in the first half. Therefore, the best way to look at it is on continuing operations is up 3.4%. On a segmental basis, hospital business up revenue 6.7%, but included in last year, we had the St. Mary's business that we disposed of in this half. On a like-for-like basis, revenue is up 7.9%. Similar on the complementary services business line, the Fresenius acquisition is included on a like-for-like basis. That's up 8.2%. Pete spoke to the healthcare services where we've lost some contracts in Life Nkanyisa. Even though they've lost the contracts, they've been able to have good margins or slight margin improvement.
The healthcare services margin has moved up from 13.5% to 14.1%. At the bottom right of the slide, we wanted to show you what's really happening in the corporate cost line and also the impact of the incentives. In last year, the incentive charge for the first half was ZAR 128 million, and this year it's ZAR 182 million on a year-to-date basis. Head office costs in isolation only grew by 1.9%, and that includes IT costs that's mainly driven by foreign denominated licensing fees of 10.1%. We have been able to reduce the head office costs. Cash flow, extremely strong. Free cash flow in this half, ZAR 560 million compared to last year, where it was a slight loss, really driven by the improvement in the working capital, but also good trading activities.
We have concluded an acquisition of a property in this half of ZAR 350 million, and our growth capex that we're very excited about will deliver in future additional returns. We spent ZAR 207 million. Also included in this half was a special dividend that we paid to shareholders in January of the RM2 transaction, where we just paid north of ZAR 1 billion. From a net debt position, our total debt is ZAR 4 billion, including lease liabilities of ZAR 750 million. There's debt maturing in the next two months of ZAR 500 million as part of our bond program, and we will refinance that bond. Balance sheet, really strong balance sheet, gearing at or net debt to EBITDA at 0.65 of a turn and return on capital of 17.5%.
Earnings per share, normalized earnings per share, we think is a fair reflection of how to look at this half trading compared to last year, growing at 9.1%. On that basis, the board has decided to declare an interim dividend of ZAR 0.21, up 10.5%. I'm going to hand you now over to Pete to take you through that.
Thank you, Pieter. From an outlook perspective, again, focusing on the respective three aspects of the strategy being grow, optimize, grow, drive, and optimize. In the growth category, we'll add a further 82 beds, start building the hospital, and the Brownfield expansions being cathl ab at Kingsbury, vascular lab at Rosepark, two more imaging transactions, which we think we'll complete, and two new PET-CT sites, which we'll open together with the commercial production of radioisotope out of the cyclotrons in the second half of the year. From the drive perspective, we've spoken about how we intend to get our occupancies to the 70% level, and we anticipate a PPD growth overall for the year in the region of 1.5%, just slightly down from the PPD growth record in the first six months.
As I explained earlier, that was caused to some extent by the distortion and move in the Easter holidays into the second half of the year. From an optimization perspective, which is really the next level of responsibilities that the executives have got to focus on, given the simplification that has gone through the group, we now have to tighten up on those assets which are not performing at the required levels of return. We will continue the focus on overheads. I think what Pieter reported shows our intent to make sure that we keep the head office overheads under control, if not in a declining function. There is still work to complete in integrating the FMC transaction and the Life renal dialysis units. We think that the renal dialysis integrated care product will also be completed by the end of the calendar year.
With that, we conclude our presentation and happy to take questions. I will hand back to the operator.
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 your line is in the question queue. You may press star and then two to leave the question queue. Once again, for the benefit of the participants 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 coming from the lines. I will now hand over to Adam Pyle for written questions from the webcast.
Right, we're just busy looking at the questions that are coming in.
I think we can start with the first question coming from Warren Riley. Your disclosure shows that the FMC acquisition is contract.
Ladies and gentlemen, apologies. Please remain online. The main venue will be rejoining us shortly. Thank you. Ladies and gentlemen, please remain online. The main venue will be rejoining us shortly. Thank you.
From that business, and that has hurt some of our patient numbers. In the context of how we see it going forward, we remain completely optimistic that we've made the correct acquisition. The footprint will be correctly bedded down and integrated into our existing dialysis businesses. The outlook for us is positive. The short-term small EBITDA loss that is recorded there is just a factual rate.
Ladies and gentlemen, apologies. They seem to have technical difficulties from the venue. They are returning us shortly. Thank you.
We have negotiated this part of the LMI transaction that these milestone payments flow will directly come through to Life Healthcare. There is also a question about the incentive charge. What is the estimation in terms of the incentive charge for the second half? The incentive charge will be at a similar charge than it has been for the first half. You will see that the charge in the second half of last year has been at a similar charge than it has been for this half.
I think the balance of the questions that have come in refer back to the questions you've just answered now in terms of the questions around Fresenius. That really is the questions that we received so far.
We have no further questions on the feed.
Thank you. Confirming we don't have any further questions from the webcast.
We will.
Thank you. At this point, we have no questions on the telephone lines either. Gentlemen, I'd like to hand back for closing remarks.
Thank you very much for your questions. Of course, our investor relations team, Adam Pyle, and our CFO, Pieter van der Westhuizen , and his team are available to take more direct questions on a one-to-one basis during the course of the next meetings. Thank you very much for your attendance.
Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.