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Life Healthcare to Expand South Africa Mental Health Unit

Life Healthcare Group Holdings Ltd. (LHC), South Africa’s largest private-hospital owner by market value, plans to expand its operations in the country’s “grossly underserviced” mental-health industry.

“In terms of capacity to demand, in South Africa we’ve only been scratching the surface,” Chief Executive Officer Michael Flemming said in a telephone interview in Johannesburg today. “Our plan is to develop more stand-alone facilities.”

In the last year, Life opened two hospitals specializing in psychological and addiction treatments east of Johannesburg and in Durban, and both were full “within a couple of months,” Flemming said. “A normal startup hospital usually takes two to three years to reach capacity.” Profit at the sites has been “high,” with cash-paying patients not covered by insurance accounting for 10 percent of the total, he said.

Life added 154 hospital beds in the six months through March, bringing the number systemwide to 8,212, the Johannesburg-based company said in a statement today. The company plans to add 141 beds in the fiscal second half and has “an additional potential pipeline” of 500 beds, Flemming said. More than half of the 686 million rand ($84.7 million) budget for capital spending for the financial year was allocated as of March 31.

First-half net income increased 25 percent to 690 million rand, and the company plans an interim dividend of 45 cents per share, a 45 percent increase. Paid patient days rose 6 percent, while “weak” collections from government-related debt resulted in cash generated from operations falling 6.2 percent to about 1 billion rand.

Life Healthcare rose 1.4 percent to 26.83 rand at the 5 p.m. close in Johannesburg, extending the stock’s gain this year to 30 percent. Mediclinic International Ltd. (MDC), South Africa’s second-largest private hospital owner by market value, has advanced 13 percent this year and Netcare Ltd. (NTC) has added 4.1 percent.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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