GHG 1Q16 Results

Georgia Healthcare Group PLC (“GHG” or the “Group” – LSE: GHG LN), announces the Group’s first quarter of 2016 consolidated financial results. Unless otherwise mentioned, comparatives are for the first quarter of 2015. The results are based on International Financial Reporting Standards (“IFRS”) as adopted in the European Union (“EU”), are unaudited and extracted from management accounts.

 

HIGHLIGHTS

GHG announces today the Group’s 1Q16 consolidated results, reporting record high profit of GEL 12.0 million (US$5.1 million/GBP 3.5 million) and earnings per share (“EPS”) of GEL 0.08 (US$ 0.03 per share/GBP 0.02 per share).

 

GHG – the leading integrated player in the Georgian healthcare ecosystem of GEL 3.4 billion aggregate value

1Q16 performance

§  Net profit was GEL 12.0 million (US$ 5.1 million / GBP 3.5 million), up 91.6% y-o-y and up 138.0% q-o-q

§  EPS was GEL 0.08 (US$0.03 / GBP 0.02 per share)

§  Revenue was GEL 71.7 million (up 33.1% y-o-y, up 4.3% q-o-q)

§  EBITDA was GEL 17.1 million (up 69.4% y-o-y, up 3.7% q-o-q)

§  Operating leverage was positive at 27.3 percentage points y-o-y

§  Return on Average Equity (“ROAE”), adjusted1, was 16.5%

 

Healthcare services business highlights

1Q16 performance

§  Revenue was GEL 60.5 million (up 41.4% y-o-y, up 9.0% q-o-q)

§  Organic revenue growth was 14.6%

§  Gross profit was GEL 27.0 million (up 54.4% y-o-y, up 10.9% q-o-q)

§  EBITDA was GEL 17.8 million (up 84.4% y-o-y, up 7.8% q-o-q)

§  EBITDA margin was 29.5% (up 690 basis points (bps) y-o-y, down 30 bps q-o-q)

§  Operating leverage was positive at 35.1 percentage points y-o-y and positive at 4.1 percentage points q-o-q

§  Net profit was GEL 12.2 million (up 116.4% y-o-y, up 115.1% q-o-q)

 

Medical insurance business highlights

1Q16 performance

§  Net insurance premiums earned were GEL 12.9 million (down 0.4% y-o-y, down 11.0% q-o-q)

§  Gross profit was GEL 1.0 million (down 54.4% y-o-y, down 39.1% q-o-q)

§  Loss ratio was 92.4% (up 9.0 percentage points y-o-y, up 3.5 percentage points q-o-q)

§  Expense ratio was 14.7% (down 0.2 percentage points y-o-y, up 0.9 percentage points q-o-q)

§  Combined ratio was 107.1% (up 8.8 percentage points y-o-y, up 4.4 percentage points q-o-q)

§  EBITDA was negative at GEL (0.7) million

§  Net profit was negative at GEL (0.1) million

§  Strong growth driven by the healthcare services business

 

Strong growth driven by the healthcare services business

 

§  Healthcare services operated 46 healthcare facilities, of which 16 referral hospitals, 20 community hospitals, and 10 ambulatory clinics, as of 31 March 2016

§  Total beds operated were 2,686, of which 2,229 beds were at referral hospitals and 457 beds were at community hospitals, as of 31 March 2016

§  Healthcare services market share by number of beds was 26.7% as of 31 March 2016 

§  Hospital bed occupancy rate was 60.4% in 1Q16 (51.9% in 4Q15)

§  Referral hospital bed occupancy rate was 66.7% in 1Q16 (59.9% in 4Q15)

§  Average length of stay at referral hospitals was 5.2 days in 1Q16 (5.0 in 4Q15)

§  Number of insured clients was 206,000 as at 31 March 2016

 

§  Medical insurance market share was 38.3% based on net insurance premium revenue, as at 31 December 2015

§  Insurance renewal rate2 was 88.5% in 1Q16

§  Total number of employees was 9,747, of which 9,315 were at the healthcare services business and 432 at the medical insurance business, as of 31 March 2016. Total number of employees grew by 1,570 employees, or at 19.2%, compared to a year ago mainly driven by acquisitions and outpatient rollout

§  Number of physicians was 2,762 and number of nurses was 2,706, as of 31 March 2016, adding 351 physicians and 432 nurses versus same time last year, and implying a y-o-y growth of 14.6% and 19.0%, respectively

§  We acquired one of the largest retail and wholesale pharmacy chains in Georgia, becoming the major purchaser of pharmaceutical products in Georgia and became the leading integrated player in the Georgian healthcare ecosystem of GEL 3.4 billion aggregate value

§  We bought-out the remaining 33.3% minority shareholding of our largest pediatric hospital, Iashvili Referral Hospital (“Iashvili”). Iashvili operates 266 beds and recorded GEL 25.2 million in gross revenue in 2015, of which GEL 8.4 million was attributable to the minority shareholder brought out as a result of this transaction

§  We also expanded the senior management team and appointed George Arveladze as a Deputy CEO, in charge of ambulatory and pharmaceutical Businesses. He brings strong knowledge of and experience in the Georgian retail sector, and has an excellent operational track record which will be invaluable to Georgia Healthcare Group

§  During 1Q16, we spent a total of GEL 16.9 million on capital expenditures, an increase of 9.1% y-o-y enhancing our service mix and introducing new services to cater to unfulfilled demand. Of this, maintenance capex was GEL 2.5 million

§  We launched an In Vitro Fertilisation service (“IVF”) at Caraps Medline (“Caraps”) – an up-scale boutique hospital in Tbilisi, particularly renowned for gynaecology and plastic surgery services in Georgia

§  We completed the renovation of our hospitals in the Samtskhe region (capex of GEL 9.3 million), which became fully operational in 1Q16

§  We have completed implementation of new enterprise resource planning system (ERP), a software for data collection, transaction capturing, accounting and further analysis of financial transactions. The ERP enhances our capabilities to identify and extract further the efficiencies in our operations

§  We further enhanced our residency programs in line with our strategy to develop a new generation of doctors. We obtained accreditation for internal medicine, endocrinology, pediatric gastroenterology, and pediatric endocrinology, with a total of 15 residents to be enrolled. We already had 43 residents involved in the residency program that we launched at the end of 2015