Georgia Healthcare Group PLC Annual Report 2018 Strategic Report Our strategy continued Growing double-digit in major business lines Pharmacy and distribution Healthcare services business Growth and margin enhancement is the area of focus for pharmacy and In healthcare business, our long-term growth strategy is concentrated distribution business while managing its market share at around 30%+. on gaining one-third of referral hospitals and community clinics, and 15% of polyclinics markets, while trough efficiency and cost control The business’ medium to long-term double-digit growth drivers are: measures, gradually increasing business EBITDA margin to c.30%. • Adding new pharmacies to the chain – over the next few years, we estimate to have 300 pharmacies; Apart from UHC, the budget of which grew by 7.1% in 2019 and • increasing same store sales by optimising product mix; and is anticipated to grow within the country’s nominal rate, the medium • increasing wholesale revenue by signing new corporate accounts to long-term double-digit growth drivers are: and engaging in state programmes and medical disposable and devices market. Referral hospitals Successful roll-out of Regional Hospital and Tbilisi Referral Hospital; The Group’s consolidated procurement department under pharmacy • strengthening existing services in elective care by adding new and distribution business, the largest purchaser of pharmaceuticals • services in our hospitals in order to close the existing medical in the country, stays focused on gaining additional discounts from service gaps in Georgia and prevent local population from manufacturers, subsequently reducing our costs of medicines and travelling abroad for treatment; and products to improve our margins. Apart from extracting procurement developing medical tourism (please see more on the synergies, establishing our position as a market leader in a private • next page); and label segment in the pharmacy and distribution business, increasing implementation of fully integrated Hospital Information the number of private label medicines and personal care products, • System (“HIS”). also allows us a significant margin improvement. Polyclinics Medical insurance • Expansion of the network by adding polyclinics through After a successful year for our medical insurance business, we remain new launches and strategic acquisitions, which is planned concentrated on the business’ expansion strategy, while increasing its both in Tbilisi and in regions; profitability through improved loss and combined ratios. As a feeder • increasing the number of registered patients from current for our pharmacy and healthcare services businesses, the medical c.150,000 to more than c.200,000. The increased number insurance business continues to prioritise retaining a greater number of registered customers enhances the cross-selling of claims within the Group. opportunities within GHG’s hospitals and pharmacies; and Diagnostics (Mega Lab) • developing new services: roll-out of dental clinics and adding other primary care services such as aesthetic care. As a newly-launched business line, the segment’s main goal as of now is to build effective logistics systems for the Group’s chain of clinics and hospitals. In the medium to long term, we will pay special attention to developing a retail network, with around 50 blood collection points countrywide, and working on additional B2B contracts in next few years. Key focus areas in the medium term and long term Referral Pharmacy Medical hospitals Polyclinics and insurance Diagnostics Segment distribution 1 Successful 1 Footprint growth 1 Retail footprint 1 Increasing 1 Building effective ramp-up of growth market share logistics system newly-launched hospitals 2 Increase in the number of 2 Margin 2 Increasing 2 Develop 2 registered patients enhancement profitability retail network Adding new services 3 Adding 3 Growing 3 Increasing 3 Attracting 3 new services wholesale retention rates B2B clients Medical tourism revenue within the Group 4 4 Digital channels 4 Digital channels Digital channels 4 Digital channels and customer loyalty Inter-Group Synergies Manage customers on integrated level 36