REG-MD Medical Group Investments Plc MD Medical Group Investments Plc: MD Medical Group maintains strong EBITDA margin
03/04/2023 08:15
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MD Medical Group Investments Plc (MDMG)
MD Medical Group Investments Plc: MD Medical Group maintains strong EBITDA
margin
03-Apr-2023 / 10:00 MSK
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MD Medical Group maintains strong EBITDA margin
3 April 2023 – MD Medical Group Investments Plc (“MD Medical Group,”
“MDMG,” the “Group” or the “Company” – LSE and MOEX: MDMG), a leading
Russian private healthcare provider, announces its audited consolidated
financial statements for the 12 months ended 31 December 2022 under
International Financial Reporting Standards (IFRS).
Key financial highlights for 2022:
• Total revenue remained flat year-on-year (y-o-y) at
RUB 25,222 million.
• EBITDA went down by 4.3% y-o-y to RUB 7,924 million. EBITDA margin
dropped by 1.4 p.p. y-o-y to 31.4%.
• Adjusted net profit decreased by 1.5% y-o-y to RUB 6,005 million.
Adjusted net profit margin was 23.8%.
• Operating cash flow declined by 9.0% y-o-y to RUB 7,734 million.
• Capex amounted to RUB 1,169 million, down 69.2% y-o-y. Investments
were mainly allocated towards the launch of new projects: MD Group
Lakhta in St Petersburg, MD Tyumen-2 and an out-patient clinic in
Yekaterinburg.
• As at 31 December 2022, the Group’s net cash position stood at
RUB 3,866 million. The net cash position to EBITDA ratio was 0.5x.
Key operational highlights for 2022 1 1 :
• Total out-patient treatments decreased slightly, by 1.7% y-o-y, to
1,826,555.
• Total in-patient treatments decreased by 3.0% y-o-y to 148,775.
• Total IVF cycles increased by 2.0% y-o-y to 16,862.
• Total deliveries increased by 2.1% y-o-y to 8,576.
Key events in 2022 and after the reporting period:
• Hospital launched in St Petersburg. In January 2022, MD Medical Group
opened a new multi-functional hospital MD Group Lakhta in
St Petersburg. Its core business is women’s and children’s healthcare
with a focus on childbirth and gynaecological surgery. Total
investments in the project amounted to circa RUB 2 billion.
• Hospital launched in Tyumen. In February 2022, MD Medical Group
launched a new multi-disciplinary hospital MD Tyumen-2. Total
investments in the project amounted to approximately RUB 1 billion.
• Novosibirsk Centre for Reproductive Medicine renovated. In June 2022,
MD Medical Group completed the renovation of its medical centre in
Novosibirsk, increasing its capacity to 1,000 IVF cycles per year.
Total investments in the project amounted to some RUB 23 million.
• Medical centre opened in Moscow. In June 2022, MD Medical Group opened
a new out-patient medical centre, Mother & Child Butovo, with a
capacity of up to 30,000 appointments per year. Total investments in
the project amounted to circa RUB 16 million.
• MGIMO Med University launched. On 1 September 2022, MD Medical Group
jointly with the Moscow State Institute of International Relations
(MGIMO) opened the MGIMO Med University.
• Dividends for H1 2022. On 26 October 2022, the Board of Directors
approved the payment of an interim dividend of RUB 642 million or
RUB 8.55 per ordinary share / GDR for 6M 2022.
• First clinic launched in Yekaterinburg. In November 2022, MD Medical
Group opened an out-patient clinic with a focus on IVF in
Yekaterinburg. The clinic can handle up to 400 gynecological
surgeries, about 800 IVF cycles and over 30,000 appointments per year.
Total investments in the project amounted to circa RUB 74 million.
• Credit facilities repaid early. In 2022, the Company fully repaid all
its existing credit facilities by settling outstanding obligations in
the amount of RUB 3,133 million ahead of schedule. The funds had been
borrowed to finance the construction of hospitals in Samara,
Novosibirsk and Tyumen.
• Medical centre opened in the Moscow Region. On 13 January 2023,
MD Medical Group opened a new out-patient medical centre,
Mother & Child Mytishchi, with a capacity of up to 24,000 appointments
per year. Total investments in the project stood at
around RUB 23 million.
2022 Financial Highlights
RUB mln FY2022 FY2021 change
Revenue 25,222 25,220 0.0%
Hospitals in Moscow 13,013 14,013 (7.1%)
Hospitals in regions 6,506 5,803 12.1%
Out-patient clinics in Moscow and MR 2,630 2,418 8.8%
Out-patient clinics in regions 3,057 2,972 2.9%
Managing company and other 16 15 6.7%
Gross profit 9,793 9,988 (1.9%)
Gross profit margin,% 38.8% 39.6% (0.8p.p.)
EBITDA 7,924 8,276 (4.3%)
EBITDA margin,% 31.4% 32.8% (1.4p.p.)
EBIT 4,969 6,622 (25.0%)
EBIT margin,% 19.7% 26.3% (6.6p.p.)
FX loss (105) (8) 1206.6%
Net finance expenses (138) (456) (69.7%)
Profit before tax 4,726 6,158 (23.3%)
Taxes (8) (15) (50.2%)
Net profit 4,719 6,143 (23.2%)
Adjusted Net profit 6,005 6,098 (1.5%)
Adjusted Net profit margin,% 23.8% 24.2% (0.4p.p.)
Revenue
Total revenue in 2022 remained flat y-o-y at RUB 25,222 million. Revenue
of the Group’s hospitals in Moscow declined by 7.1% y-o-y due to a
decrease in COVID-19 diagnostic and treatment services driven by the
pandemic slowdown, which was fully offset by a spike in revenue of
regional hospitals and out-patient clinics. The growth was mainly driven
by a stable demand for IVF in Moscow and the Moscow Region (the Group’s
revenue from IVF up 9.9% y-o-y), on-target capacity utilisation rates at
regional hospitals (revenue up 12.1% y-o-y) amid a post-COVID recovery in
demand for medical services, and strong performance of new projects –
MD Group Lakhta and the medical cluster in Tyumen.
Revenue from medical services not related to women’s and children’s health
accounted for 47.9% of total revenue, down from 51.2% in 2021.
2022 Key Operating Expenses 2 2
RUB mln FY2022 FY2021 change
Payroll and Social contributions 10,132 9,526 6.4%
as % of total Revenue 40.2% 37.8% 2.4p.p.
Material expenses 5,133 5,568 (7.8%)
as % of total Revenue 20.3% 22.1% (1.8p.p.)
Medical services expenses 308 335 (8.0%)
as % of total Revenue 1.2% 1.3% (0.1p.p.)
Functional expenses 3 3 336 265 26.9%
as % of total Revenue 1.3% 1.1% 0.2p.p.
Gross profit
Gross profit in 2022 declined by 1.9% y-o-y to RUB 9,793 million. Gross
profit margin decreased by 0.8 p.p. y-o-y to 38.8% primarily due to a rise
in personnel costs as a result of business expansion associated with the
launch of MD Group Lakhta and MD Tyumen-2.
Impact of key operating expenses
In the reporting period, the Company's key operating expenses remained
tightly controlled and slightly increased by 1.4 p.p. y-o-y as a
percentage of revenue (to 63.1%) amid the growth of personnel costs and
functional expenses.
The share of personnel costs grew by 2.4 p.p. y-o-y as a percentage of
revenue (to 40.2%) mainly due to a decline in COVID-19 diagnostic and
treatment services (resulting from a higher share of fixed costs) and the
opening of new facilities (MD Group Lakhta and MD Tyumen-2) and their
gradual ramp-up to design capacity.
The share of materials expenses decreased by 1.8 p.p. y-o-y as a
percentage of revenue (to 20.3%) on the back of a reduction in
material-intensive services in the Company's portfolio, including therapy
related to COVID-19.
The share of medical services expenses declined by 0.1 p.p. y-o-y as a
percentage of revenue (to 1.2%) due to the gradual vertical integration of
business processes, including the opening of the Company’s own laboratory
and data processing centre.
The share of functional expenses increased by 0.2 p.p. y-o-y as a
percentage of revenue (to 1.3%), driven by the growth in marketing
expenses amid the Group’s business expansion.
EBITDA
EBITDA declined by 4.3% y-o-y and amounted to RUB 7,924 million in 2022.
EBITDA margin decreased by 1.4 p.p. y-o-y to 31.4% due to a decline in
COVID-19 diagnostic and treatment services.
Operating profit
Following impairment testing in 2022, the Company recognised impairment of
investments made in the previous periods, including fixed assets of the
Ufa clinical hospital (opened in 2014) and goodwill of the Novokuznetsk
out-patient clinic (acquired in 2015) on the back of an unfavourable macro
environment. In addition, in the reporting period, the Group recognised a
RUB 85 million impairment of previously acquired construction documents
due to the change in plans to build a clinic in St Petersburg. Total
impairment recognised in 2022 was RUB 1,287 million.
As a result, operating profit dropped by 25.0% y-o-y to RUB 4,969 million
in 2022, with an operating profit margin of 19.7%.
Adjusted net profit
In 2022, FX loss amounted to RUB 105 million, with its growth attributable
to a 5.3% rouble appreciation against the US dollar as compared to the
beginning of the year.
As a result, the Company's adjusted net profit decreased by 1.5% y-o-y to
RUB 6,005 million in 2022. Adjusted net profit margin slightly declined by
0.4 p.p. y-o-y to 23.8%.
Key cash flow statement figures
RUB mln FY2022 FY2021 change
Operating cash flow before working capital changes 7,902 8,346 (5.3%)
Changes in working capital (155) 158 n/a
Taxes (13) (5) 172.4%
Cash from operating activities 7,734 8,499 (9.0%)
Cash used in investing activities (848) (2,912) (70.9%)
Cash used in financing activities (5,904) (5,031) 17.4%
Effect of movements in exchange rates on cash held (109) (96) 13.2%
Cash and cash equivalents increase 873 461 89.4%
In 2022, operating cash flow before changes in working capital decreased
by 5.3% y-o-y to RUB 7,902 million as a result of the decline in EBITDA.
Working capital
RUB mln December 31, 2022 December 31, 2021
Inventories 1,212 1,165
Accounts receivable 1,147 1,112
Accounts payable (2,447) (2,537)
Contract liabilities (1,972) (1,990)
Working capital (2,060) (2,250)
The Company has historically maintained negative working capital as a
source of additional financing. In 2022, working capital remained negative
at RUB (2,060) million and amounted to 8.2% of revenue.
In 2022, operating cash flow decreased by 9.0% y-o-y to RUB 7,734 million,
primarily due to the changes in working capital caused by the update of
medicine and consumable supply terms as suppliers switched from deferred
payment by instalments to advance payment.
Cash used for investing activities, mainly consisting of capital
expenditures and interest income on deposits, amounted to RUB 848 million.
Total Capex declined by 69.2% y-o-y to RUB 1,169 million in 2022. The
significant drop in Capex in the reporting period was due to macroeconomic
uncertainty. The Group’s investment programme has now been resumed.
In 2022, cash outflows related to financing activities amounted to
RUB 5,904 million vs RUB 5,031 million in 2021. The 17.4% y-o-y increase
was due to the distribution of interim dividends to shareholders for
1H 2022 in the amount of RUB 642 million, as well as the early repayment
of RUB 3,133 million to the lender.
As at 31 December 2022, net cash increased by RUB 873 million to
RUB 4,463 million.
Debt portfolio
RUB mln December 31, 2022 December 31, 2021
Total debt 597 4 4 5,513 5 5
Short-term debt 106 1,786
Long-term debt 489 3,727
Cash and cash equivalents 4,463 3,590
Net debt / (Net Cash position) (3,866) 1,924
Net debt/(Net cash position) / EBITDA (0.5х) 0.2х
The Group's debt decreased by 89.2% y-o-y to RUB 597 million as at the end
of 2022 mainly due to the early repayment of RUB 3,133 million towards the
outstanding principal. Cash balance grew by 24.3% y-o-y to
RUB 4,463 million as at 31 December 2022 vs RUB 3,590 million as at
31 December 2021.
As at 31 December 2022, the Company’s net cash position amounted to
RUB 3,866 million. The Company's debt is fully denominated in roubles. The
net cash position to EBITDA ratio as at the end of 2022 was at 0.5x.
Notes:
1. Minor deviations in the calculation of totals, subtotals and/or
percent changes are due to rounding
2. The Group’s consolidated financial statements are available on the
Group’s website: 6 www.mcclinics.com/investors/financial-reports/
***
For further information please contact:
Investors
Battalova Renata
Investor Relations Director
Tel.: +7 917 294 28 82
r.battalova@mcclinics.ru
About MD Medical Group
MD Medical Group is a leading provider in the Russian private healthcare
service market. The Company manages 53 modern healthcare facilities,
including 10 hospitals and 43 out-patient clinics in 26 regions of Russia.
In 2022, MD Medical Group's revenue amounted to RUB 25.2 bln while EBITDA
amounted to RUB 7.9 bln. The Company's GDRs are traded on London Stock
Exchange (LSE: MDMG) and Moscow Exchange (MOEX: MDMG).
Forward-Looking Statements:
This press release contains forward-looking statements, which are based on
the Company’s current expectations and assumptions and may involve known
and unknown risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or implied
in such statements. The forward-looking statements contained in this press
release are based on past trends or activities and should not be taken
that such trends or activities will continue in the future. It is believed
that the expectations reflected in these statements are reasonable, but
they may be affected by a number of variables which could cause actual
results or trends to differ materially, including, but not limited to:
conditions in the market, market position of the Company, earnings,
financial position, cash flows, return on capital and operating margins,
anticipated investments and economic conditions; the Company’s ability to
obtain capital/additional finance; a reduction in demand by customers; an
increase in competition; an unexpected decline in revenue or
profitability; legislative, fiscal and regulatory developments, including,
but not limited to, changes in environmental and health and safety
regulations; exchange rate fluctuations; retention of senior management;
the maintenance of labour relations; fluctuations in the cost of input
costs; and operating and financial restrictions as a result of financing
arrangements. No statement in this press release is intended to constitute
a profit forecast, nor should any statements be interpreted to mean that
earnings or earnings per share will necessarily be greater or lesser than
those for the relevant preceding financial periods for the Company. Each
forward-looking statement relates only as of the date of the particular
statement.
Use of non-IFRS indicators
As part of disclosing the Group’s financial results under IFRS, we use the
following non-IFRS indicator: Adjusted net profit.
We believe Adjusted Net profit to be instrumental for investors and
analysts in assessing the core operating performance of the Company and
analysing comparable results for different periods, excluding one-off
gains or losses.
Adjusted Net profit means net profit under IFRS plus (1) impairment loss
on goodwill; (2) impairment loss on fixed assets; (3) impairment loss on
work in progress; minus (4) other income from property tax recovery.
Impairment loss on goodwill and fixed assets
As macro environment became more challenging in FY2022, the Group
recognised a one-off RUB 201 mln impairment loss on goodwill of the
Novokuznetsk out-patient clinic and a one-off RUB 1,000 mln impairment
loss on fixed assets of the Ufa clinical hospital (the excess of the fair
value of the goodwill / fixed assets over their book value).
Impairment loss on work in progress
Adjusted net profit for FY2022 does not include a RUB 85 mln impairment
loss on work in progress related to construction documents and the change
in the Group's plans to build a clinic in St Petersburg.
Other income from property tax recovery
Adjusted net profit for FY2021 does not include other income from property
tax recovery in the amount of RUB 45 mln.
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7 1 Detailed information on operational results can be found in the
following 8 press release from 6 February 2023
9 2 Adjustments in 2021 are associated with a change in the methodology
for reflecting the payroll and social contributions and functional
expenses
10 3 Functional expenses include marketing, IT, client service costs,
staff training and communication services
11 4 Including RUB 106 million of short-term lease and RUB 489 million
of long-term lease
12 5 Including RUB 97 million of short-term lease and RUB 597 million
of long-term lease
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Dissemination of a Regulatory Announcement that contains inside
information in accordance with the Market Abuse Regulation (MAR),
transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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ISIN: US55279C2008
Category Code: FR
TIDM: MDMG
LEI Code: 213800XKI6VHY4JBS612
Sequence No.: 234270
EQS News ID: 1598913
End of Announcement EQS News Service
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