Revenue of IHH Healthcare, parent of Fortis, soar 66 pc boosted by COVID-19

By Lee Kah Whye
Singapore, August 30 : Last week, Malaysian healthcare group, IHH Healthcare Berhad (IHH) reported second-quarter financial results which saw revenue jumping from MYR 2.565 billion (USD 630 million) to MYR 4.270 billion, a 66 percent increase helped by COVID-19 services provided in India, Singapore and Malaysia.
For the reporting period that ended June 30, the company reported a stunning reversal from a loss of MYR 121 million to a net profit of MYR 483 million (USD 115 million).
IHH runs a total of 31 hospitals in India and is the controlling shareholder of Indian healthcare group Fortis with a 31.1 percent stake as well as owns 52.3 percent of Hyderabad-based private healthcare provider Continental Hospitals Limited.
It is the largest operator of private hospitals in Southeast Asia and also the majority shareholder of Acibadem Healthcare Group, the largest Turkish private healthcare company. In Singapore it operates hospitals such as Gleneagles and Mount Elizabeth, and also runs the Parkway group of clinics, laboratory and diagnostic centres.
Gleneagles also manages several hospitals in the southern part of India including Bengaluru and Chennai. In Malaysia, IHH owns the International Medical University in Kuala Lumpur, the Pantai group of hospitals and the Prince Court Medical Centre.
The major shareholders of IHH are Mitsui of Japan, Malaysia's sovereign wealth fund Khazanah Nasional and Citigroup of the US. It is listed on both the Singapore and Kuala Lumpur stock exchanges.
In its results briefing to analysts and shareholders on August 26, the company revealed that COVID-19 related services accounted for 31, 24 and 12 percent of its Q2 revenue in India, Singapore and Malaysia respectively. Services provided include lab testing, vaccine administration, treating of COVID and non-COVID patients on behalf of governments, border arrival screening and testing.
IHH also reported that with the easing of border restrictions and lockdowns compared with last year, patients are returning to their hospitals. It also attributed the better performance to disciplined cost controls especially in India with Gleneagles Hong Kong Hospital achieving EBITDA (earnings before interest, tax, depreciation and amortisation) breakeven in May 2021.
Aided by Q2 EBITDA which rocketed four times from MYR 268 million to MYR 1,106 million in the comparable period last year, the group's first half earnings attributed to owners of the company dramatically turn from a loss of MYR 440 million to a gain of MYR 859 million.
The net income increase was also attributed to the re-measurement to fair value of interest in DDRC SRL Diagnostics and disposal gains from Apollo Gleneagles Hospitals, offset by a substantive write down of Parkway Yangon Hospital in Myanmar and Gleneagles Chengdu Hospital in China.
In a stock exchange filing, IHH explained that "the increase in expenses was mainly due to a low base last year with lower doctors' salaries for certain groups of doctors whose salaries vary with revenue or services rendered. The hire of contract employees for COVID-19 related services rendered, as well as the consolidation of DDRC SRL Diagnostics and Prince Court Medical Centre also contributed to the higher expenses."
"Notwithstanding higher expenses, the group's EBITDA margins improved from 10 precent in 2QFY20 to 26 percent in 2QFY21 with the implementation of stringent cost management measures and operational efficiencies from higher patient volumes."
IHH was the last of the major Singapore listed healthcare groups to report their Q2 financial results. Earlier, Raffles Medical, Q&M Dental and Healthway Medical all reported exceptional financial performance due to huge demand for COVID related services provide to governments for example testing including pre-event and border testing, and vaccinations.
The company said that it expects a short-term impact from the resurgence of COVID-19 cases as the pandemic evolves with movement restrictions across where they are operating.
They said that they aim to mitigate this by executing on its "refreshed strategy".
This strategy involves amongst others extracting synergies from their international network and enhancing efficiencies, driving efficient growth through opportunities to expand into new or established clusters where it is value accretive to the company, proactively diversifying into new revenue streams in areas of diagnostics services and laboratory.
IHH also aims to improve case mix and at the same time partner public health organisations, while maintaining tight cost and capital discipline. Innovation efforts will also come to forefront through digital healthcare such as the introduction of telemedicine.
IHH Healthcare managing director and CEO Kelvin Loh said that given the Delta variant of the coronavirus is causing a resurgence worldwide, the situation remains fluid.
"But our priority remains the same - we will provide the fullest extent of COVID-19 support for governments so that patients continue to get the best of medical care, while ensuring the safety and well-being of our people," he said.