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Life Healthcare warns on earnings after disposal

The company’s half-year earnings could fall as much as 55%.

South Africa‘s Life Healthcare said on Wednesday half-year earnings could fall as much as 55% due to costs related to the disposal of its stake in India’s Max Healthcare, impairments and other investments.

Shares in the company fell 5.30% to R26.27 after the private hospital operator predicted headline earnings per share (Heps) for the six months ended March 31 of between 24.1 cents and 29.5 cents, down from 53.7 cents a year earlier.

Heps is the main profit measure used in South Africa and strips out certain one-off items.

In September, Life Healthcare said it would sell its 49.7% stake in Max Healthcare to KKR-backed Radiant Life Care for R4.3 billion ($300 million).

Life Healthcare also cited a R256 million marked-to-market valuation loss related to the disposal, as one of the factors impacting Heps, along with an increase in contingent consideration relating to past company acquisitions.

Marked-to-market accounting is a way of valuing assets based on how much they could sell for under current market conditions.

Group revenue is expected to rise by between 8.6% and 10.4%, while normalised earnings before interest, tax, depreciation and amortisation (Ebitda) will increase as much as 4.8%.

Life Healthcare competes with listed rivals Mediclinic International and Netcare.

Last Wednesday Mediclinic hit a more than three-month high on after it reassured investors with a forecast for net profit that was in line with market expectations despite a tough business backdrop.

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