A new prescription could be written for ailing day hospitals specialist Advanced Health.
It was indicated in a notice to shareholders on Wednesday that the group, which listed in 2014, has appointed an internal subcommittee to conduct a strategic review of the business to “assess options available to maximise shareholder value”.
Advanced, which comprises a small network of day clinics in SA and a more established footprint in Australia, has seen a shoddy showing on the JSE in recent years. Over five years the company’s value has shrunk by about three-quarters as a longer-than-expected move into profits by its local operations dragged on the company’s bottom line.
The share crept up 3.8% to 28c on the news of the possible review, but still lags the last stated net asset value (NAV) of 38c a share. The share price is higher than the tangible NAV figure of about 20c a share.
At last count (the interim results to end-December 2021) Advanced’s fledgling SA day clinics were still trading in the red to the tune of R18m. This was a marked improvement on the 2020 interim showing, when losses topped R32m. By contrast the Australian Presmed operations posted a healthy R23m profit from turnover of R217m.
Advanced did not offer much detail on the possible strategic review, noting only that the process will involve an assessment of the company’s strategic options and the alternative strategies available to unlock and enhance value.
Advanced is not followed widely by mainstream asset managers, but there has been some speculation that the company should split the local and Australian operations. Advanced also carries a market capitalisation of less than R140m, which could make it an easily digestible acquisition for larger private hospital groups or even cash flush private equity players.
While the SA operations have struggled for profitable traction, Advanced has expressed optimism about longer-term prospects.
In his interim report, CEO Gerhard van Emmenis said that demand for day hospitals in SA continues to grow. He noted: “Medical Schemes have embarked on channelling same-day procedures to day hospitals and members who attend to a day surgical procedure in the traditional hospital are paying additional co-payments.”
Van Emmenis indicated there has been a downgrade of members into lower options due to the unaffordability of private healthcare and Advanced is aligned to accept most of the low-cost medical options.
He also pointed out that day hospitals are small and do not have the same overheads as the traditional hospitals, making it an attractive option to funders. “Abroad there is a higher proportion of day hospitals compared to acute hospitals and it will take time for SA to be in the same position as this is linked to regulatory requirements.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.