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Edited Transcript of LHC.J earnings conference call or presentation 11-May-20 8:00am GMT

Q2 2020 Life Healthcare Group Holdings Ltd Earnings Call

Illovo Jul 2, 2020 (Thomson StreetEvents) -- Edited Transcript of Life Healthcare Group Holdings Ltd earnings conference call or presentation Monday, May 11, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Adam Pyle

Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa

* Mark Chapman

Life Healthcare Group Holdings Limited - International CEO

* Pieter Phillippus van der Westhuizen

Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director

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Conference Call Participants

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* Alex Robert John Comer

JP Morgan Chase & Co, Research Division - Research Analyst

* Kane Slutzkin

UBS Investment Bank, Research Division - Director and Research Analyst

* Roy D. Campbell

Morgan Stanley, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to Life Healthcare Inc. Interim Results Presentation. (Operator Instructions) Please note, that this conference is being recorded.

I'd now like to hand the conference over to Mr. Pieter van der Westhuizen. Please go ahead, sir.

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [2]

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Thank you very much, Judith. Good morning, ladies and gentlemen. Upfront, I want to apologize, it's the first time that we present in this format from 3 different locations. And logistically, there might be some issues like dogs barking or somebody pressing a doorbell, but I'm sure we'll get through this. And then the second point I want to make before we start is we have brought forward our results by roughly 2 weeks. This is to enable us to communicate more on a more regular basis with the market in this environment of COVID pandemic. And it's had a significant impact on our first half results, and we expect it also to have a significant impact on the second half of our financial year. And therefore, we think it's appropriate that we can communicate on a more regular basis with our stakeholders.

I'm going to then move to Slide 2. The first slide, group overview. Group had a strong operational performance in the first half. We have revenue up at 6.8% to ZAR 13.2 billion and normalized EBITDA up 2.7% to ZAR 2.8 billion, that's pre-IFRS 16. So the underlying results reflect a normalized EBITDA growth of 8.7%, and I'll later talk to the specific details around that and how we get to those numbers. We have a strong financial position and support from lenders to weather the COVID-19 pandemic and have undrawn facilities of ZAR 3.8 billion as -- at the end of March 2020. And we -- in the process of increasing our facilities by a further ZAR 3.9 billion in South Africa, of which we have already been able to conclude ZAR 2.2 billion as of the end of last week.

Operational plans are in place to manage the business through the COVID-19 pandemic, and we're adapting our long-term strategy objectives for the new environment. And we have also implemented a number of cash preservation levers, of which includes a suspension of our interim dividend.

For COVID-19, estimated financial impact has been ZAR 264 million for H1 results at revenue and ZAR 166 million at EBITDA level. And the last, from an overview perspective, you should be quite pleased that our quality scores have generally improved in all our territories in Southern Africa and international.

I'll move now to Slide 3. In all our territories, we've been able to deliver on operational excellence goals, but it has been impacted by COVID-19. In SA, we had good overall financial performance and good growth in revenue across all business lines. We have been able to stabilize our margins in SA, largely due to the initiatives that we implemented towards the back end of last financial year. And Adam will talk a bit about that.

The SA business has been negatively impacted by COVID-19 from around mid-March and most pronounced in the month of April, and Adam will give an update of where we're tracking in terms of May from a pandemic perspective. And we've seen an improvement in patient safety adverse events and quality measures in Southern Africa.

Alliance Medical had good revenue growth in its core markets of U.K., Ireland and the Northern Europe and all regions affected by the COVID-19 from around mid-Feb 2020. We've seen margin improvement in PET-CT wave 1 and the implementation plans for PET-CT wave 2 is on track. We're pleased that Preston cyclotron maintenance plan has been completed and has become operational from March, and we now have 4 functioning cyclotrons to serve our PET business.

Scanmed had a storming H1 and had strong revenue growth and EBITDA growth. But we have decided to suspend the disposal proceeds until the environment is more stable.

On our growth initiatives, we had good progress on diagnostic imaging and services in SA, but the execution of our projects have been delayed because of COVID, and we do expect traction in H2 of 2020. LMI delivered solid results and have been able to produce a breakeven EBITDA just north of 0 of GBP 0.1 million. We had implemented a number of digital outpatient innovations in response to our -- in our MyLife business, we stopped that in response to the COVID-19 pandemic.

Moving on to the next slide. As a management team, we had 5 key points that we were focusing on, and that was pre COVID-19 pandemic. It's effectively our score content we set ourselves. First was operational efficiencies. We wanted to stabilize margins. Excluding COVID, we have been able to do that. And we have roughly been able to save about ZAR 100 million throughout strategic initiatives or efficiency initiatives that we've put in place in H1. Margin improvement in PET-CT wave 1 in the U.K. has also come through. We have been able to stabilize the U.K. radiopharmacy through Preston that to be reopened in March, and Dinnington is due to become operational towards the back end of this financial year. The SA diagnostic opportunity, we've made good progress. And with the support of a Board, we were in process of executing on a couple of transactions, but we have delayed these in the response to COVID. We do expect progress in H2.

The Poland operations, as I stated, had a good response from bid -- a number of bidders support in the disposal process. But due to COVID, we've delayed, decided to suspend this, and we will take this up towards the back end of the calendar year. And we wanted to deliver flat EBITDA at LMI level, and we have been able to do that even though we have started to see in H1 some drop down in sales and more pronounced in April, but that has still been able to produce a flat EBITDA level.

Moving on to the next slide. One of our key strategic focus areas has been to diversify out of non-acute businesses. As demonstrated on this graph, you would see that we're still at 33% non-acute and 67% at revenue basis at acute business, has been impacted by COVID but we're still on track in terms of this.

Moving on to the next slide. COVID, as I stated, had a significant impact. A key thing that we're focusing on as a business is to make first to look after our staff and our patients. And secondly, to make sure that we remain as a business and weather the storm of the pandemic. COVID has had a roughly ZAR 264 million impact at revenue level, of which roughly 40% is from South Africa and the balance is from international business. In response to this, we've been raising additional bank facilities. At SA level, we have unutilized facilities of ZAR 3.8 billion, as I stated, at the end of March, of which a further ZAR 3.9 billion has been in process. And we have been able to get additional ZAR 2.2 billion of that ZAR 3.9 billion already by the end of last week.

We've implemented a number of cash levers, the largest ones being the decision to suspend our interim dividend and also delay a number of CapEx projects and investment projects. On this slide, you can see more detail about the remaining ones. And all of these are in process and in the execution phase.

Now I'm going to hand over to Adam Pyle, our SA CEO, to take you through the operational review of Southern Africa.

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [3]

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Thanks, Pieter, and good morning, everyone. If we move on to slide covering the -- our response to the COVID-19 pandemic provided a detailed response to this pandemic in our April 20 trading statement. In the appendix slides of our presentation, we have also provided a more detailed information.

In the presentation supporting, I will just provide a summary of our response. I'll also include some of the impact that we've experienced in April as well as how we prepared for the return of Medicaid in SA divisions to the business. And I'd say that, first of all, that within all of this, the safety of our patients, employees and doctors of health is paramount importance, obviously. But we have plans across each facility. These plans cover the operations, our employees, support services, doctors and the clinic interventions. And these plans have been guided by the protocols and guidelines of the Department of Health, the World Health Organization, the NICD, the various medical societies in South Africa as well as our COVID committees. And our COVID committees in each of our hospitals have played a critical and important role in helping us manage this pandemic in terms of the planning and they have been a great success.

We've also touched on international reference points where appropriate. These plans also include detailed search plans in every single facility and we use a dynamic forecasting model to assist us with logistics planning in this regard.

A key focus here, obviously, is also in ensuring that we have adequate PPE for our doctors, our employees and our patients, support services et cetera, and we have made excellent progress in this regard. However, this is obviously a continuous focus, and that's something that we'll be focusing on over the next 2 to 3 or 4 months.

As regards our engagement with government, we continue to engage on both the national and provincial level. The process is still underway as regards establishing pricing for the public sector patients and the commitment from Life Healthcare in this regard is to do it on a cost recovery basis.

We also participate in the HASA and Business for South Africa (sic) [Business Unity South Africa] initiatives and feel that we're contributing important money in this regard.

Moving on to the next slide which covers the COVID impact, Slide 9. And before discussing that impact, I just want to reflect on the overall very good performance of the Southern Africa business. Because if you look at the table on the left, it covers the pre-summary results as of end February. We had good PPD growth, PPD is up 2%, resulted in increase in the occupancy levels and revenue growing at 7.3%, which is good in this environment. In addition to that, the benefits of the business optimization programs we spoke about at our results last year have resulted in an improvement in our operational EBITDA margin.

In addition to the financial and operational performance, what we've seen is the business also had a strong quality performance based on improvement in our clinical quality scores.

Then moving on to the COVID impact. And this COVID impact was really felt from about the 17th of March onwards when the Disaster Management Act Regulations were promulgated. This continued and accelerated throughout April as we moved into what has been referred to as the lockdown but now the alert level 5. And how this panned out across the businesses was a little different. And in the acute business, we saw occupancies in April fell to 40%. And this is -- and we saw a reduction in admissions across the board, whether it would be the -- in emergency cases through the accident emergency units, medical cases and surgical cases. We did still see, despite a reduction in medical cases, an increased length of stay, particularly around medical.

In the complementary services business, the impact was a little mixed. We didn't see much impact in March, it is primarily because there's a stable patient base for renal dialysis and oncology. And acute rehabilitation has a length of stay of 25 days and mental health with a length of stay of 10 days. So the impact was limited in terms of March. But we have seen in April though was an impact in the mental health business, non-emergency cases have been delayed.

Within the Life Esidimeni business, there has been limited impact to the revenue line, but obviously, there has been an increase in cost as the businesses handled the pandemic, but there has been a significant impact on the Life Employee Health Solutions business as a high number of their clients, obviously with the lockdown regulations, have had to close their businesses.

So if we move on from here in terms of looking at our response, so move on to Slide 10 in terms of how we're preparing for medically necessary admissions. We have implemented the detailed plans across all our facilities the return of medically necessary admissions, ensuring that the COVID-19 risk is carefully and appropriately managed. Some of these measures include the testing of patients before admission, random testing of our employees and doctors and the daily screening of employees, doctors, support services and patients.

In addition to that, each facility is planned to cover a whole range of issues, the management of facility and its employees. We've mentioned a few and then there's more detail in the appendix. We have used the guidelines and protocols issued by the various medical societies, our own internal COVID committees, and we've looked at international best practice in terms of how we handle medically necessary admissions. We have started cautiously and slowly. And I suppose the nature of dealing with this pandemic is such that even now the situation is fluid, its changing, and in this regard, we'll continue to have to make changes.

Although it's still early days, we have started to see an increase in our PPDs and theater cases. And if you look at the first week of May and you compare it to the average week in April, our PPDs were up 14% for the first week of May compared to a weekly average in April. And our theater cases and cathlab cases were up nearly 20% compared to the weekly average in April. That -- the number of cases we have booked for this week, theater cases booked for this week is higher than last week. So we are seeing an increase in activity. But we are being cautious and we know the situation changes on a regular basis.

We'll move on from here in terms of covering the business overview which is Slide 11. What the table on the left shows is a split between the Southern Africa business in the acute hospitals, complementary services and Healthcare Services businesses. We've added in some detail on the acute side covering the number of ventilators we have and the number of anesthetic machines we have. If you combine them together, we -- and you compare it to the number of ICU and high-care beds we have, we pretty much get to the 1:1 ratio in that regard.

If you look at the capacity growth, we -- our focus is not really on adding capacity to this business, but it's really on driving utilization and in improving occupancies. We all know how to add beds where it is appropriate, and you can see we've had a reduction in acute beds. But we have added 80 mental health beds and that was in H2 2019. We see the demand in certain areas of mental health increasing, and so we are careful in terms of we add beds, but we appropriately will do so.

On the renal dialysis side, we continue to see strong growth in renal dialysis business, and we'll continue to add renal dialysis stations across the country where we see good growth.

The graph on the right shows a compound annual growth rate on our revenue side, and it shows a good consistent growth across all our lines of business, with particularly good growth in complementary services and Healthcare Services.

We move on to the Slide 12, which covers our overall performance. This table shows the good overall performance of the business despite the impact of the COVID-19 pandemic. PPDs were up 0.2% at the end of March compared to the 2% that were up at the end of February. And this resulted in revenue growing by 6.3% to ZAR 9.4 billion. This is on the back of a revenue per day increase of 5.8%, which was driven by a 4.5% tariff increase and a 1.3% positive case mix shift. Our view is that the COVID had a ZAR 112 million negative impact on our revenue, and without that, our revenue would have grown to over ZAR 9.5 billion at 7.5%, which in this market, we think, is a very good growth.

Moving on to normalized EBITDA, that increased by 4.7% to ZAR 2.2 billion. And we split this EBITDA between what we call an operations EBITDA and our corporate costs. And an operations EBITDA line, this increased by 5.7% to ZAR 2.67 billion, and corporate costs increased by 11% to ZAR 468 million. Key drivers behind the increase in the corporate costs, the increase in IT licensing fees and the recruitment of employees in key focus areas of business optimization and our clinic area, and the benefits of these recruitments can be seen certainly in our results.

Our views at the COVID impact had a -- roughly a ZAR 67 million impact on our EBITDA -- operational EBITDA. And if you exclude this, then our EBITDA would have grown by 8.4%, which we saw an improvement in our margins against revenue growth of 7.5%. And this would have resulted in an overall normalized EBITDA margin, excluding the COVID, remaining at 23.8% on last year, which we would think in these circumstances, a very good performance.

We move on to the next slide which covers the occupancy for our business on Slide 13. The bar graph on the left shows the occupancy split between the different lines of business, the acute, the complementary and overall, as well as showing the split in occupancy between at the end of March and at the end of February. If you see at the end of March, our overall occupancy was 67.1%, down from a 67.7% in March 2019. And this is a result of the COVID pandemic. And you can see primarily as a result of the drop in the acute occupancies. If you look at the year-to-date February graphs, you'll see that actually the occupancies from February '19 to February '20 increased from overall 66.8% to 67.3%. Just a note on the blue bars for the complementary businesses. The drop in overall occupancy was due to the ramp-up of the 80 mental health beds we added in the second half year, end of last year. And we continue to see a good performance in this regard lately. And that's why the occupancy, the complementary services business improves from February to March.

Move on to our next slide which covers the -- our quality scores, the Slide 14. So outside of the good operational and financial performance of the business, our continued focus on driving quality improvement has resulted in a strong overall quality performance by the business. On the patient experience scores, we are pretty much level on the prior year. If you look at the patient quality and safety measures, pretty much across the board, we see an improvement in our scores. In addition, we are particularly pleased about the improvement in our patient safety adverse events, which dropped from 2.58 to 2.21, as a result of a continued renewed focus across every unit in the business.

Finally, I would just like to cover the Healthcare Services in the next slide, Slide 15. And Healthcare Services is made up of 2 businesses, we had the Life Esidimeni and the Life Employee Health Solutions businesses. So in this regard, both businesses showed a solid revenue growth at 7.9% to ZAR 657 million, but a slightly different story playing out as regards to EBITDA. Life Esidimeni had a really good performance in terms of stabilizing the EBITDA margins. But Life Employee Health Solutions has been impacted and impacted negatively by increased price competition in their market as well as the increased costs related to the COVID-19 pandemic, and this resulted in a deterioration of the EBITDA margin.

That now covers the Southern Africa review. So I'll now hand over to Mark for the operational review for the international.

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Mark Chapman, Life Healthcare Group Holdings Limited - International CEO [4]

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Okay. Morning, everyone. Thank you, Adam. I'd also like to start with an update on the COVID-19 response. The international business operates across a number of countries, as you know, and government measures have varied from country to country with different responses according to local health care policies. We have it ahead across specific government and healthcare guidelines across different countries with an overarching best practice framework for the business. With each country introducing specific patient and employee measures, such measures have included the patient-facing environments, the provision of appropriate PPE, introducing telephone patient prescreening practices, introducing also COVID-19-specific patient literature. Both of these have been very important in gaining the confidence of our patients when visiting our facilities.

We've also introduced physical screening where appropriate. And revised PPE measures for our employees to name but a few.

For those employees that are nonpatient facing, quite early on in the process, we put restrictions on international and local travel. We restructured face-to-face meetings, both internally and externally. And for those employees, have started working from home and introduced new ways of working which has been supporting the front line staff.

With the impact of COVID-19 starting late February within the international business, it was important that the international business took appropriate revenue and cash preservation measures very early on. You'll see the volumes have decreased on average by 6% as national healthcare systems have prioritized urgent and emergency cases. Each country has taken steps to protect revenue streams, reduce the costs and preserve cash. And indeed, working in partnership with national healthcare providers. Good examples of this has been in the U.K. with a team who have managed to conclude an agreement with the NHS to secure average revenue payments for the PET contract during March and April. These were at pre-COVID levels going forward. We expect this to continue whilst the activity is below the pre-COVID level activity as well within PET. And the team were also in discussions around the DI business with individual trusts.

We've also seen in the U.K. how the team responded to the government's COVID-19 response around CT scanning with a provision of 16 mobile units at the call of the NHS over the next 4-month period. Similar in Scanmed within Poland, the team have reached an agreement with the government and have set to secure average revenue strip -- revenue payments for long-term contracts during the COVID crisis.

Cash preservation measures have also included the reduction in the deferral CapEx programs, interim embargo on noncritical spend, reducing variable employee costs, recruitment freezes, deferral of bonus payments and rent payment holidays where appropriate.

We've also taken advantage of government support schemes. The teams internationally have taken these schemes where they can. Such examples are being deferred insurance contributions, deferred tax opportunities and preferential business loans as well as employment protection funds. It's important to say, within Ireland, the U.K. and Italy, such schemes have been introduced to support the temporary layoff of employees with the government grants.

Moving on to Slide 19. I just want to give you a quick overview of the AMG business within Alliance Medical. You'll see in the revenue lines that the U.K. represents 45% of the revenue followed by Italy at 44%; Ireland at 18% -- sorry, at 11%, and then 17% for the rest of the geographies. I think it's also important to highlight bottom left, where you'll see the U.K. has 87% of the revenue with the public sector. That's the cut to the NHS. So the examples I just spoke about has been very beneficial during the COVID crisis.

Moving on to the next slide. I want to go through the activity of the scan volumes, been strong underlying growth in volume activity across all regions. However, we know that, certainly in the U.K. and Italy, volumes have been impacted during the COVID crisis. What is encouraging is that the PET-CT volumes continue to grow, and at H1, this has been a 13.9%. At February, before the impact of COVID, this is up 15.9%. But you'll see on the chart on the right-hand side, a sharp decline in activity in scan volumes during March. We feel the impact of the COVID-19 response in March 2020 has been circa GBP 5 million on the AMG business.

On the next slide, I'd just like to show you the impact on the volumes across the core regions. You'll see in the U.K. that the volume pressure has been circa 60%; in Ireland, 65%; and then Italy, 80% where we have a higher presence in Northern Italy. What is encouraging is the PET-CT line in the U.K. It has still dropped by 40%, but not as significant as the other scan volumes within the MR and the CT business.

I think it's also important to mention that you'll see that the volumes took a sharp decline and plateaued. But in the last 2 weeks, we are seeing volume growth at some of the locked down areas or restrictions are lifted.

We move on to the next slide. Let's say, I believe the business is now fit for recovery. Yes, we've gone through the crisis management position when the business have to move at pace to understand the immediate needs on the business when COVID-19 impacted. We then move to what I'll call the operations of COVID-19 new operational delivery process is put in place. We're supporting our people and also managing our cash and capital. However, I believe we're now coming into the recovery stage when you start seeing the light of the volumes increasing in the last couple of weeks. And really, it's to be a fact, we need to look at our recovery strategy in 4 key areas. How do we capture the pent up demand? It's clear that it's been a number of weeks without any activity, so all those patients to be scanned as well as the demand of new patients that have not been included in the facilities and the pathways to date.

We're also structuring our business and looking at new ways of working. It's clear, our engagement with patients and also our staff have changed through the COVID crisis, and we should capture some of that. There will also be business opportunities going forward. It's clear to see that. And a good example is within the U.K., working with the government around the CT COVID crisis in support for them. I also believe there'll be some corporate activity in the coming months, but there will be opportunity potentially for some consolidation.

Moving on to Slide 22. The overall performance financially, again, a stable overall performance. Yes, we've been impacted by COVID-19. But if you exclude this impact, it would show a good year-on-year growth. We do have operational pressures on margin. Mainly what we're aware with the RP, radiopharmacy pressures, which I'll come on to shortly. We've also had some price pressure as we move the short-term mobile provision to longer-term contracts, and again, you'll see that shortly. We've also invested in some overheads, again, expected to see the benefits of that in 2020. So there's been some downward pressure on margin where some of those items will wash out in the coming months. We also see that the COVID has impacted on 2% of the margin up to H1. It's expected this will continue obviously into H2 going forward, but overall, I'd say, the normalized EBITDA growth against last year at 2.7%.

Okay. If we move on to Slide 24. Just going through some of the regions. If we look at the U.K. to start with and, again, focusing on the PET-CT elements of the business and molecular imaging. You'll see on the charts on the right-hand side, I think it summarizes it clearly. The revenue is increasing, and we're just shy of 60% revenue associated to the PET business in the U.K. Volumes continue to grow, circa 13%. Like I said, in H1, it was 13.9%, impacted by COVID.

We also see -- I think it's important to note is that the margin has grown. My computer just went off mode, I hope it's still online. The margin has increased year-on-year, and you'll see that the investment early on in the contract is now starting to show the marginal economics coming through in the PET-CT business. Also worth noting is that this is a 10-year contract and underpinned with certainty up to 2025. And with PET wave 2, this means that the Alliance Medical business now contracted and operate 70% of the NHSE PET-CT services in England.

Moving on to Slide 25. We know we've had pressure in the last 12 months around the radiopharmacy business. And I think the chart within this presentation shows that the demand and also the capacity and that pinch point in 2019 and early 2020. This is when we have to embark on a period of refurbishment of the 4 cyclotrons in use. When we've operated the 3, this is where the pinch point has occurred. I'm pleased to say, as Pieter noted earlier on, Preston became operational in March. This increased the capacity on our sustainability, and we could manage the demand going forward. We'll also bring Dinnington online at the back end of H2, which will really future-proof the capacity within the RP business.

It will also enable us to do the last refurbishment in Sutton, whilst maintaining 4 operational sites going forward. And again, we have had pressure on margin this year because of the increased costs associated to operating 3 cyclotrons. So again, that will not wash through into the coming year.

Only in the U.K., the diagnostic imaging business, the strategy remains that of moving towards long-term partnerships predominantly with the NHS. And again, you'll see in the chart to the right, this has moved from 44% to 69% of the business is now on long-term contracts with more price assurance and ability to plan operationally for that management team to support those contracts. Underlying like-for-like growth is showing at 7%, which is encouraging. And again, you can see before COVID that the waiting list within the U.K. were increasing. Those patients are still there. And like as I said earlier, I believe during the COVID crisis, there'll be new patients that will be needing to be scanned, the diagnostics early on in their pathway. So again, I think going forward, post COVID, this is an area where we need to look to manage the pent up demand.

Moving on to Slide 27, looking at the Italian business. It's clear that Italy was impacted most in the early stages back end of February. In February, growth was at 2.2% year-to-date. At the H1, it closed the revenue down at 5.9%. This has performed well, but has been impacted by COVID clearly. There's also been a move where the ASL, which is the government budgets, were increased this year. So there has been some margin impact where patients have used the government budget for a scan as opposed to using the self-pay mechanism. So you'll see a slight reduction in growth on the self-pay, but that's being used for activity on the ASL. So the overall activity in Scanmed has shown growth, so that margin is impacted.

The acquisitions of last year are performing very well, and this continued consolidation within the regions to reduce the cost base. I foresee continuing opportunities going forward with this consolidation within the marketplace within Italy.

Moving on to Ireland. Ireland has had a fantastic year in H1 with solid growth across all parts of the business. It has been impacted by COVID in March, but still revenue growth of 10.1%, a strong underlying performance across all areas of the business, which puts us in good stead going forward.

If I now look at Poland and Scanmed. Pieter mentioned earlier, the group has decided to delay the process of potentially disposing the Scanmed due to the uncertainty and the market volatility brought by COVID-19. We will, as a management team, look to restart this program at the back end of 2020. That is depending on the market conditions at that point in time. However, I'd like to stress that Scanmed is a business that had a very strong H1 performance. It has been impacted again by COVID-19 to the tune of PLN 2.7 million, but still, the performance shows an 81% growth. The revenue growth has been supported by increased pricing from the government and also very strong performance within the cardiology business, which now has uncapped headroom within the government supply. There's also been excellent work within the margin management with improved efficiencies across the hospitals and reduction overhead spend through a process of optimization across the business.

Moving on to Slide 29. Finally, although it is at the forefront of everything we do, is our quality and clinical measures. I'm pleased to report that if you look at the year-on-year trends, virtually every measure, every indicator is showing an improvement or static. There are 3 areas that have shown a slight decline, but I'm pleased to say that they are still ahead of the targets, the internal targets that we have. So I think this is because this gives us a very strong clinical platform to continue to grow our business going forward. And that concludes the operational element for the international business. Thank you.

I'd like to then pass you back to Pieter to go through the growth initiatives.

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [5]

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Thank you, Mark. We remain very excited about our growth initiatives. The 3 main ones being the SA radiology opportunity, the outpatient care business and LMI internationally. All 3 have been impacted by the COVID-19 pandemic, most notably, the SA imaging opportunity where we had to delay the execution of a couple of transactions. We do expect traction in this in H2 of 2020. But at this stage, we had to decide to delay it.

On the outpatient care, we've opened 6 MyLife clinics, of which 4 are in partnership with Pick 'n Pay. And we've introduced a number of outpatient innovations in response to the COVID-19 pandemic. This includes a free public COVID-19 symptom checker, a COVID-19 staff risk tracker for employers and a direct doctor-to-patient virtual consultation in light of the recent HPCSA telemedicine dispensation. We are in the process of rolling this out to our existing clients as well as additional clients that we are targeting.

LMI had a very good H1. We have been able to be at breakeven at EBITDA level, as demonstrated on the graph on the right-hand side. Just to remind ourselves, the focus on LMI is to drive the sales of Neuraceq, a radioactive tracer used to identify amyloid plaques in the brain in order to diagnose Alzheimer's disease. Unfortunately, the filing of Biogen's therapeutic disease-modifying drug Aducanumab has been delayed due to COVID-19, but it's anticipated that this will happen in H2 of 2020.

What's pleasing is that Neuraceq and other amyloid beta-targeting PET biomarkers obtained reimbursement by Switzerland starting in April 2020. We have seen a drop in sales in Neuraceq of around 80% in the month of April, but we are seeing improvement in sales in the last few weeks. And there's a strong pipeline of products at various stages of development with Phase II study of Tau tracer commencing during the year.

I'm now going to take you through our financial slides. Moving to Slide 33, highlights of the financials. As both Adam and Mark alluded, we had a good -- a very good underlying performance in the group across all our businesses, with underlying revenue up 8.9% and underlying normalized EBITDA pre-IFRS 16, up 8.7%. Even though COVID did impact us, we still reported good revenue growth of 6.8% and reported normalized EBITDA pre-IFRS 16 of 2.7%. This was driven by PPD growth of 0.2% and PET-CT volumes of 13.9%. And as both Mark and Adam stated, PPD growth was up 2% at the end of February, and PET-CT volumes was close to 16% up as of the end of February.

We remain in a strong financial position, and then we have undrawn facilities of ZAR 3.8 billion. Normalized EPS was up 12%, up to ZAR 0.55 per share. If one takes into consideration the impact of COVID, we would have been close to around 30% up on normalized EPS for the period. The impact of COVID has been roughly around the ZAR 0.09 per share.

Moving you to Slide 34, in terms of the income statement. Just I want to highlight that in 2019, the numbers have been impacted by H loss related to the Max transaction of ZAR 354 million before tax. In the current period, we have a gain on the derecognition of a lease asset of ZAR 75 million of profit. And then the result of the Max disposal transaction, we had reduced interest cost, as you would note that our interest burden reduced from ZAR 527 million to ZAR 457 million. The profit before tax for the period was ZAR 1.4 billion, up from ZAR 822 million, 74% up against last year. Attributable profit at ZAR 780 million compared to last year at roughly ZAR 360 million.

Moving you to Slide 35. Just what we're trying to demonstrate here is what the impact of IFRS 16 and COVID has been on our results. If you start from the left-hand side, you will -- the 2020 numbers as reported, ZAR 13.2 billion in revenue level. And at normalized EBITDA of ZAR 2.9 billion. IFRS 16 has a positive impact on our numbers, and therefore, we deduct that. It's about ZAR 117 million at EBITDA level. At that attributable profit, you will note that it's negligible at a ZAR 8 million loss. And then COVID, a ZAR 166 million negative impact at EBITDA level and ZAR 132 million impact at attributable profit. Taking those 2 massive issues out of the numbers, we'd like to give these as underlying results. Underlying results reflecting a revenue growth of 8.9% to ZAR 13.5 billion and operating profit of ZAR 1.9 billion, a 10.5% growth. Obviously, you can't exclude these because it is part of a business, but we just want to demonstrate that the underlying business remained very strong forward H1, but these 2 factors had have an impact on our numbers.

Moving you to Slide 36. This is just splitting out the impact of COVID-19 and IFRS 16 into the different reporting lines in SA international growth initiatives. What I want to highlight here is that the impact of IFRS 16 with increased interest-bearing borrowings by roughly about ZAR 1.3 billion, as you can see on the numbers on the right-hand side, and PPE about -- roughly about the same number. International has been impacted by ZAR 152 million at revenue and about ZAR 100 million at normalized EBITDA.

Moving you to Slide 37, we want to just take you through the bridge or waterfall on normalized EBITDA margin. If you look at this waterfall graph on the right -- top right-hand side. EBITDA margin, as reported, has been 22.1%. IFRS 16 had a 0.9% impact -- positive impact on the margin. So pre-IFRS 16, we have a 21.2% EBITDA margin. COVID had a 0.8% impact on the margin. So the underlying numbers for H1 is 22%. And then the radiopharmacy supply challenges had a 0.3% impact on the margin. So that takes us to explain what we did experience last year at 22% last year and 22.3% effectively this year, but the underlying is still at 22%. So relatively flat against last year.

Moving on to the next slide, Slide 38. The earnings per share. Earnings per share includes the impact of IFRS 16 that, as I stated, it's been negligible at a ZAR 8 million loss. But the earnings have been negatively impacted by estimated ZAR 132 million due to the COVID-19 pandemic. You will note that normalized EPS moving up to ZAR 0.55 compared to ZAR 0.491 at last year, a 12% improvement, mainly driven by the reduction in interest cost, but also impacted by COVID. As I stated earlier, excluding the COVID impact, we would have been closer to around the 30%. That would have been a really strong in H1 performance.

Moving you to Slide 39, in terms of the financial position. We're in a strong financial position. We've been able to successfully refinance our international debt towards the back end of March 2020, reducing the interest rate by approximately 50 basis points and extending the maturity date of international debt by an average of 4 years. We have undrawn bank facilities as at the end of March of ZAR 3.8 billion. And as I stated earlier, we've been able to negotiate an additional ZAR 2.2 billion by the end of last week, and we've still been in the process of finalizing about the ZAR 1.2 billion that would be supporting banks in South Africa. That will provide us with sufficient liquidity to weather the storm of COVID and also provide us with access to funding for potential small targets that we are targeting at this stage.

On the cash flow on Slide 40. We had a weak H1 in terms of working capital collections. You will note that the cash generated from operations is down about 8.3% against last year, although EBITDA has been up around 2.7%, mainly due to 2 issues. Firstly is one of our large medical aids in South Africa's payment towards the end of March only reflected in our bank records on the 1st of April. It was roughly ZAR 140 million. And then we had to increase our stock levels in response to COVID of roughly around ZAR 100 million. If one takes those 2 into account, we were close to around 90% cash generated from operations, as a percentage of EBITDA.

This is Slide 41. As I stated earlier, due to the impact of COVID, we have implemented a number of short-term cash preservation levers and we are setting these targets for the management teams to make sure that we execute on this in the next 6 months, most notably, the CapEx and the dividend paid. But also we've decided to defer or suspend dividend -- bonus payments to senior management members, of which all the management teams have contributed, also setting up a staff fund to support some of our lower-level staff members to weather the storm of COVID in this next 6 months.

Slide 42, I just want to demonstrate what the impact has been on our debt. You would note that we -- our debt -- our average cost of debt is reduced from 4.01 to 3.48. Although the debt has increased from ZAR 12.8 billion to ZAR 15.5 billion, largely due to 2 issues: firstly, it's IFRS 16 of roughly about ZAR 1.2 billion; and then the second thing is the weakening of rand, effectively making the debt level seems higher because of the exchange rate.

Moving into Slide 44 in terms of our COVID-19 outlook. What we're doing, as Adam -- and both Adam and Mark says, we update a forecast model on a weekly basis where we've got a base in a bear case. This is effectively based on the previous week's trading as well as what happens in the broader market internationally as well as in South Africa. And we then utilized that to plan in terms of liquidity requirements as well as staff requirements and our business operations. You'll note that on the SA side, what we're reflecting on the graph is where we've tracked for F '20 is the green line, and for 2019 is the blue line. We are forecasting that we will see improved PPDs, but we won't be at the 2019 levels. We do expect that the surge in terms of COVID cases will be coming through in the back end of August and September, but we do see that the medical necessary procedures continue to increase during this period.

On the Alliance Medical side, very similar. But we see that the scan volumes will increase across all the markets with normal scan volumes only reached in Q2 of 2021.

Just on an outlook for H2 2020 on Slide 45. COVID-19 will obviously have a massive impact on our results for H2. And the level and duration of the pandemic remains uncertain. Our focus remains on treating our patients and looking after our employees and doctors. We won't cut discretionary spend and reduce CapEx without causing long-term harm to the business. So to only do those things that's necessary. But we do expect that difficult environment will continue, but with improved activities over the next 6 months.

In SA, we will focus on managing the COVID-19 pandemic and the return of our medical necessary surgery. We will reinitiate the SA radiology opportunity and we estimate that the CapEx spend will be about ZAR 750 million for the full year for SA. Alliance Medical, the business will focus on the post-lockdown increase in activities as well as adapting to the new environment. We will further stabilize our radiopharmacy supply with the opening of the fifth cyclotron towards the back end of Q4. And we estimate that the CapEx spend will be approximately ZAR 800 million. And largely in terms of Scanmed, we do expect that the sale process will be revived once the situation stabilize, probably towards the back end of 2020.

Moving to Slide 46. In terms of the CEO recruitment process, the Board has put the process on hold until operating environment stabilizes. In the interim, I will continue to act as CEO and CFO with the support of an excellent group Exco with Adam, Mark, Tanya Little, and Avanthi Parboosing, Suren Govender and Brett Mill. And just lastly, 2020 is for World Health Organization year of the Nurse. It's appropriate in these times that our nurses are recognized for the invaluable role they play in our society, as well as the front-line in dealing with the COVID-19 pandemic. We thank our nurses for the immense contribution that they've done, not only to us as organization to -- but to the communities at large.

On Slide 47, we are -- as part of our results that we're releasing today, we're also releasing a trading statement. In 2019, we disposed of our investment in Max Healthcare. This transaction resulted in a net profit of ZAR 1 billion, but it's not recurring. We've also then had net proceeds on the disposal of this of ZAR 3.8 billion that we utilized to reduce debt levels in the group. Both these factors will have an impact on our results for H2 compared to 2019, and hence, we're releasing a trading statement. In addition, the financial impact of COVID-19 is very uncertain, and we will update the market on a more regular basis over the next 6 months.

And just lastly, on Slide 48, we are adapting our strategy for the environment. Just to remind you that we are a global healthcare provider with a dual strategy. We are offering integrated healthcare model in SA and the diagnostic imaging opportunity internationally. We have a diversified offering with a growing share of revenue and earnings from non-acute sources, and we focus on clinical excellence and building an analytics-led technology-driven group across all markets and businesses.

The next few slides are the response towards COVID-19, mainly from South Africa perspective. We don't intend to go through this on this presentation, but it is there for the market to have a look at in terms of how we see the next 6 months playing out and what our responses going to be.

We want to end there and open up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question from the line comes from Roy Campbell of RMB Morgan Stanley.

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Roy D. Campbell, Morgan Stanley, Research Division - Equity Analyst [2]

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Two questions from my side, please. The first one is just on the financial assistance from the NHS. Can you just try and give me a little bit of an understanding of the implications of that financial assistance? I presume it's -- I'm trying to think it from an accounting point of view. I presume it's more a loan and does not have an earnings impact. In other words, we're not recording any revenues over here. And then what is the future cash flow implications? Do you have to pay that back or is that burned away as such? That's the first question.

And then the second question maybe for Adam is -- sorry, I'm just trying to find the slide over here, but it's the one way you've given an indication of the volumes that's dropped down, presumably it was in April, alert level 5. Just around the medical admissions, what are the kind of admissions that have fallen away? And is that generally a short length of stay, which has resulted in your -- those that are still in hospital being a longer length of stay? Those are my 2 questions.

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [3]

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Thank you. Mark, do you want to add on Roy's first question?

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Mark Chapman, Life Healthcare Group Holdings Limited - International CEO [4]

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Yes. Thanks, Roy, for the question. For the NHS for March and April, I think it's easier just to treat it as if we are not being paid on activity for the PET contract, but treat it as it's moved to a block. So for those periods in time above those 2 months, it's been a revenue payment. And there isn't a requirement not being treated as a loan, it is revenue. Why are they doing it? The NHS realize medical as a very key supplier going forward and indeed around the PET-CT contract and the oncology service across the U.K. They want to make sure that the business is on a sound footing as we come out of it. We are in discussions again for May, June and July. And that's ongoing at the moment. Again, I do foresee probably a similar instance for these -- for the remaining 3 months whilst activity levels are below the sort of the pre-COVID levels. That explains that.

Sorry, I think on your -- you also asked if it’s happening anywhere else. Similar mechanism in Poland, where it's effectively to a block contract again. And in Italy, we do have an annualized ASL budget. Now obviously, with the lockdown and low scan numbers, that budget has not been utilized. So we will look to utilize that for the remainder of the year as activity increases. The new budget will be set in January of 2021. So again, that opportunity is still there for that budget. Our challenge there is actually around the activity.

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [5]

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Roy, next regarding the medical admissions. Look, I suppose we were a little surprised by the dropped medical admissions, but then this was the first time we've been in a level 5 lockdown. I suppose the sort of drove some of that is you've got internet, travel, people aren't mixing at work, then at restaurants, et cetera. So what you have is less spread of pneumonia, flus, et cetera. And that has resulted in a decrease of medical admissions to hospitals. Whether we're losing some of the shorter cases, maybe. I think some people are getting sick and don't want to go to hospital, but what we are seeing is people who do come to hospital, they are quite sick, and hence the increased length of stay.

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Roy D. Campbell, Morgan Stanley, Research Division - Equity Analyst [6]

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Okay. And so Adam, in your forecast, your chart or your base in your case, is that -- what are you forecasting? Is that a return on some of these medical cases? Or is it more from a surgical point of view?

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [7]

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So what we do is we look at it across the different categories. We forecast an increase of surgical cases for impact. We also have a slight increase in medical cases lately. It's very hard to kind of forecast this with any degree of accuracy here. And the thing, as Pieter says, we do it in a weekly basis. But we do make assumptions that as but -- as the economy opens up, you have more travel, et cetera, et cetera, you're going to have an increasing amount of the sort of pneumonias, et cetera, coming through. So we do forecast an increase, but we don't see a forecast accuracy.

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Operator [8]

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The next question comes from Alex Comer of JPMorgan.

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Alex Robert John Comer, JP Morgan Chase & Co, Research Division - Research Analyst [9]

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Look, I'm just looking at your COVID-19 outline scenarios. And obviously, that green line, now a little bit in March, has fallen a lot in April and yet we saw a relatively significant negative impact. So what are the losses in March in terms of EBITDA? That's really my question. And just looking at that bull and bear case, have you done any estimates on what the losses are likely to be? Any of the scenario for the rest of the year?

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [10]

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Piet, do you want to handle that?

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [11]

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Yes. So I'll split it into the 2 regions. Effectively for international, we had a loss in the -- for the month of March, although not significant, it was still a loss. On the SA business, we were still, in the month of March, we still made a profit because we were really impacted for 2 months. In terms of the guidance that we're putting forward, we are basing it on volume growth that's coming through, although at very low levels. Obviously, we also have some COVID positive cases coming through on the SA side. And in most scenarios, we do see a slow pickup in terms of EBITDA. We're still at just north of a breakeven point effectively on SA and international basis. Still making a profit, but obviously, not at the same levels as we've done in the prior year.

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Alex Robert John Comer, JP Morgan Chase & Co, Research Division - Research Analyst [12]

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Sorry, I was -- look -- I was asking about sort of the profit in April, not in March.

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [13]

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I think that's -- in terms of April, we've made a loss in South Africa as well as international basis.

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Operator [14]

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(Operator Instructions) The next question comes from Kane Slutzkin of UBS.

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Kane Slutzkin, UBS Investment Bank, Research Division - Director and Research Analyst [15]

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Sorry, I just missed the end of that question with Alex. If I can just ask it slightly differently. You mentioned you have had 40% occupancies in April, thereabout. You've seen some increased activity in May. So could you just remind us where the breakeven sort of point -- sorry, I sort of heard you mentioned something about that now, but if you could just give us a sense of what breakeven is in South Africa. And how flexible have you been able to be with respect to some of your fixed versus variable costs? Then just on maybe the balance sheet, you guys have done some refinancing of debt. Are you at all concerned with sort of higher levels of debt at AMG? This currency hasn't helped now you've got COVID. But just interested to hear your thoughts there, particularly as SA perhaps is very lowly geared. And then just finally, just the elective theme, I guess, overseas generally is quite well documented. But at AMG, in particular, are you seeing any sort of material offsets to this? Obviously, you've spoken about the CT contracts with the NHS. But are you seeing any other thing maybe on an MRI segment given that there is sort of some evidence sort of build thing that suggested in some cases in COVID, the patients are having sort of secondary issues to underline that, which may create some demand. So just wondering whether there's -- there are any sort of other material offsets to sort of the elective theme obviously?

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [16]

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Okay. Adam, I'll do the first 2. And Mark, if you can, I mean, just look at the last question. In terms of the first question, when I discussed the profits and losses, obviously, it was for the month of March. I could rightly say it that in April, we experienced a 40% occupancy levels. It's very difficult in a hospital environment to say what the breakeven point is from -- it might just be based in occupancy because it depends on what the nature of the patients are. Typically, our fixed cost base is around between ZAR 1.1 billion to ZAR 1.4 billion in SA, very much dependent on what the type of patients are. We typically have revenue on a monthly basis of between ZAR 1.3 billion to ZAR 1.6 billion. At the 40% occupancy level, we have seen a significant drop in revenue. And therefore, revenue is below ZAR 1 billion, and we've made a loss of that situation.

We do expect that in the month of May, it will not be at the same levels as we experienced in April. In terms of the debt levels in the U.K., you rightly said that it has increased significantly, just purely based on a net debt-to-EBITDA basis. We keep on monitoring it at this stage. But it is not overly concerned because of maturity date of our debt. The key risk that we do run is a refinance risk in 4 years’ time. In terms of our ability to serve the debt, we have operations where that earns hard currency, and we also have facilities available that we can draw down if we need to service debt. So not at this stage, overly concerned. Mark, you can just respond to the last question.

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Mark Chapman, Life Healthcare Group Holdings Limited - International CEO [17]

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Yes. In response to last question, the sort of other opportunities. We are in discussions with the NHS around opening up capacity for MRI scanning. Nothing's been formalized as yet. But during the crisis, the sort of the test of choice has been CT. And our elective work, which is predominantly the MRI, that's where we've seen the significant decrease in activity. As I said in the presentation, in the last 2 weeks, we have started to see the MRI scanning increase as the lockdown has opened up in some territories.

One area that we have seen an increase, it's not that significant but is worth noting, is in Italy with some of our clinics, pathology, where they have opened up testing centers, up again, directly supporting the COVID initiative for those local governments.

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Kane Slutzkin, UBS Investment Bank, Research Division - Director and Research Analyst [18]

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Right. Mark, maybe while I've got you, one last question. Just on Neuraceq. You -- obviously, my sense -- obviously you see -- would you like that or is this saying that the filing has been delayed, so I think it's Q3 with their sort of date. And we sort of widely perceived that some of this is COVID-related. I think hiccup there were sort of what you saying they've had some difficulties in processing highly complex data from the study. Just interested to hear your sort of take on that as opposed to sort of blaming it on COVID alone. What's your level of confidence perhaps at this stage albeit this is a lot more of a free options result, but yes, just interested to hear your thoughts on that.

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Mark Chapman, Life Healthcare Group Holdings Limited - International CEO [19]

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Yes. So talked to the team that obviously have been in discussions with Biogen. They are saying that there's circa 100 staff in the Boston office that were impacted. Our experience is when we are getting Neuraceq through FDA approval, there is a significant amount of work that needs to be carried out to get it to that position. So I do think there's something in that, although it might be sort of, to your point, did they have everything in place at the right time question with the added pressure of staff challenges within the Boston office. My take is still relatively optimistic. Yes, I think there's still -- it will get logged -- lodged with the FDA, and I believe it's still as part of a fast-track process. So once it has been lodged, it should be a 6-month response rate. So time scales, it's not idle. It has been pushed out slightly, but overall, still relatively confident. What we have seen is still an uptake in other pharma companies using Neuraceq to support their clinical trials. So although the sales, as Pieter alluded to, in the last sort of 6 weeks have dropped down circa 80%, we're still seeing high levels of interaction and involvement with new research trials going forward around Neuraceq, also within the tower business.

So I think from LMI, one of our strategies was to make sure that, that business is breakeven. I think that continues to be the case. So this delay with Neuraceq won't impact on the operational part of the business from the day-to-day running. But obviously, we want to get that confirmation from Biogen soon rather than later.

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Operator [20]

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Gentlemen, at this stage, we have no further questions on the line. I'd now like to hand over for questions from the webcast.

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [21]

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Right, Adam here. So I'll just -- I'll coordinate the questions. Probably a good role to have as I could just start with asking a question. So starting with just a question, Pieter, which I'll give to you and to Mark, which is in terms of the sale of Scanmed. And sorry, some of these questions that have been sent have really been numbers that have been dealt with on the phone or even on some of the questions. Just that under what circumstances will the company's in the sale of Scanmed? And is there kind of a rough idea in terms of timing in that regard?

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Mark Chapman, Life Healthcare Group Holdings Limited - International CEO [22]

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Pieter, do you want to cover that one?

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [23]

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Yes, I'll cover that. So in terms of our estimation is that it will be towards the back end of 2020. The environment in which we will start the resource strategies once the COVID has stabilized in Poland, and there's more a clear indication of what the implications of that would be and what the run rate of that business will be going forward.

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [24]

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Okay. Another question regarding -- as we -- in this recovery path, we have to adjust our pricing downward in our different regions. I think on behalf of the SA business is that, at this stage, we certainly wouldn't think of our (inaudible), right? I suppose going forward, I mean, we're not sure what the impacts on these are. We know there's going to be some sort of economic fallout from this in SA. So we don't know what the impact to this is. I suspect it will be increasing pressure in terms of mix in numbers, but we would expect to see a bigger increase of numbers falling into network arrangements. So that's a WHO because you've got a pricing discount to get those numbers. But if you participate in those networks, you get increased volumes. So that's how we pointed 2 things, hoping no real price adjustments in the short term. Mark, as I think you've covered from your side in terms of the comparisons you had.

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Mark Chapman, Life Healthcare Group Holdings Limited - International CEO [25]

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Yes, correct. But very much more on the long-term contracting and indeed, actually, on the mobile provision, there could be a supply and demand situation. So I think the prices will hold.

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [26]

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And then here is a question in terms of, can we overcome all the regulatory hurdles regarding the radiology opportunity in SA?

I suppose our view is that our model -- we believe our model enables us to operate in the current regulatory framework. We still have to go through a CC process, and so there's still a process we have to undergo, but we believe our model is at the buy. We do expect some challenges there but part of the make of it mostly going in.

There's a question, do we still expect a surge in COVID patients in SA?

Quite a tough one because there are so many forecasts made and predictions worldwide, and mostly, it happened to be wrong. There's so many variables, and we just seen such new unchartered territory here. It may -- it does make a pretty good plan. We have to plan for a surge in cases, which we don't really know when it's coming. We don't know how long it will be. We don't know how big it will be. So it does really complicate matters in terms of timing. And I suppose we do work on the basis that we do expect some form of surge of COVID cases to arrive in SA at some time. But if anybody knows when, and when, and when and how, et cetera, please let me know.

And Pieter, a question for you in terms of -- do we believe we are correctly positioned to be a beneficiary of consolidation in the international hospital industry market?

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [27]

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So our strategy is not to buy hospitals internationally. Our strategy is to have an integrated healthcare network in South Africa and to focus on diagnostic imaging internationally. So, therefore, we will not do any transactions from that side. And we do not expect to be a beneficiary because we mainly serve governments internationally in the diagnostic imaging space.

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [28]

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Okay. I think that covers most of the questions. What I'll do is I'll go through if there are any questions that we haven't answered, I will -- we will just respond to those involved. Okay, that's all from our side so far. Thank you.

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Operator [29]

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(Operator Instructions) Gentlemen, we have no further questions from the lines. Do you have any closing comments?

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Pieter Phillippus van der Westhuizen, Life Healthcare Group Holdings Limited - Acting Group CEO, Group CFO & Executive Director [30]

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Yes. Thank you, Judith. Just one lastly, I want to thank all our staff in the group for their contribution during this time of crisis. As we stated, our focus is to make sure that we look after our staff as well as our patients and doctors in all of our facilities. We've got sufficient facilities, bank facilities available to weather the storm. And we will be very prudent in terms of capital allocation in the next period. We want to thank for the support of our bankers. And we look forward to engage with our stakeholders more regularly over the next 6 months. Thank you very much. Goodbye.

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Adam Pyle, Life Healthcare Group Holdings Limited - Group Strategy & IR Executive and CEO of South Africa [31]

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Thank you.

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Operator [32]

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Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.