IHH Healthcare Bhd, a leading premium global healthcare provider reported that for the three months ended 30 June 2017, its revenue increased 12% year-on-year (“YoY”) to RM2.8 billion.
This was due to sustained growth in inpatient admissions and revenue intensity across all home markets and the ramp up of new hospitals opened in March 2017. Tokuda Group and City Clinic Group in Bulgaria, acquired in June 2016 and since consolidated into Acibadem, also contributed to the increase in revenue.
Earnings before interest, tax, depreciation, amortisation, exchange differences and other non-operational items (“EBITDA”) declined 3% to RM535.8 million.
This was mainly on the back of start-up costs incurred by the newly opened Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital, as well as higher operating and staff costs.
Headline profit after tax and minority interests (“PATMI”) grew 29% to RM316.6 million, following a RM241.1 million one-off gain from the Group’s divestment of its non-core minority stake in Apollo Hospitals in May 2017. PATMI (less exceptional items)* decreased 54% to RM86.2 million on higher depreciation, amortisation and finance costs following the opening of two new hospitals in Hong Kong and Istanbul in March 2017.
For the six months ended 30 June 2017, revenue increased 10% YoY to RM5.5 billion, while EBITDA decreased by 6% to RM1.1 billion. PATMI increased 63% to RM786.6 billion while PATMI (less exceptional items) decreased 32% to RM288.0 million.
IHH maintained its strong financial position, with a cash balance of RM4.6 billion as at the end of June 2017 and an improved net gearing of 0.14 times (30 June 2016: 0.19 times).
In July, its largest operating and wholly owned subsidiary, Parkway Pantai, established a US$2 billion (~RM 8.6 billion) multi-currency medium-term note programme. Parkway Pantai Group drives all of IHH’s healthcare operations across Asia. This is the first time IHH or any of its subsidiaries are initiating a fixed income programme since its initial public offering. Its recent US$500 million senior perpetual securities issuance last month will further diversify sources of funding and provide additional debt headroom for general corporate purposes.
In June this year, IHH broke ground for Gleneagles Shanghai Hospital. The 450-bed facility, expected to open in 2020, is part of its RMB8.0 billion (~RM5.1 billion) project pipeline for the region that also includes Gleneagles Hong Kong Hospital and the upcoming Gleneagles Chengdu and Gleneagles Nanjing hospitals.
Together, these new facilities will build on IHH’s robust existing primary care network in Greater China to deliver integrated, quality healthcare across key regions.
In July, Parkway Pantai acquired a 55% equity interest in Angsana Holdings Pte Ltd (“Angsana”) for a total consideration of S$9.3 million (~RM29.3 million). Angsana will complement IHH’s existing suite of diagnostics services, by providing molecular diagnostic test services, including biochemistry, chemistry, haematology and molecular blood analysis and testing.
IHH Managing Director and CEO, Dr Tan See Leng, said: “We delivered topline growth across all markets despite a challenging operating environment by keeping a relentless focus on core operations while actively rebalancing assets in our portfolio. We are pleased that our two newest hospitals, which will be growth drivers as they ramp up, are already contributing to revenue.
We look forward to our next phase of growth, especially in Greater China, where we have laid out plans to make it our fifth home market after Malaysia, Singapore, Turkey and India.”
IHH continues to believe in the sustained demand for quality private healthcare in its home and key growth market of Greater China.
In the year ahead, the Group expects to face cost pressures on several fronts. These include wage inflation from increased competition for talent in its home markets, rising purchasing costs with the stronger US Dollar and higher pre-operating costs and start-up costs from new operations which would partially erode profitability in the initial stages.
To mitigate these effects, IHH will remain prudent in its cost management, improve the mix of higher revenue intensity cases and ramp up new facilities to achieve optimal operating efficiencies.
Given its extensive geographical footprint, the Group will be exposed to geopolitical risks and currency volatility. This may result in translational differences in its balance sheet and income statement. IHH adopts natural hedges where possible and efforts to “de-risk” currency exposure for Acibadem remain ongoing.
IHH remains confident that its brands and network of hospitals, supported by its robust balance sheet and operating cash flows, will enable it to successfully overcome the challenging operating conditions expected for the year ahead.