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IHH Healthcare’s Q2 earnings up 12% on better turnover

IHH Healthcare on Friday posted a 12 per cent improvement in bottom line to RM185 million (S$60.9 million) for its second quarter ended June 30, 2019, due to higher revenue and in some ways, also the adoption of the MFRS 16 Leases accounting standard with effect from this year, it said.

As a result, the group recognised depreciation of its right-of-use assets, instead of recognising operating lease expense and amortisation of prepaid lease payments on these assets, it said.

Revenue climbed 37 per cent to RM3.6 billion for the period, as a result of organic growth from existing operations and the contribution from Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital, both opened in March 2017, it said.

Furthermore, the acquisition of Amanjaya Specialist Centre in October 2018 and Fortis Healthcare in November 2018, also contributed to the increase in revenue and earnings.

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But excluding exceptional items, its net profit would in fact have decreased 6 per cent to RM240.1 million on higher financing costs. The decrease was also attributed to a high base in Q2 2018 when the group had recognised RM77.1 million forex exchange gain, as compared to RM10.7 million forex gains in Q2 2019.

IHH managing director and CEO, Tan See Leng, said he is “pleased” with the group’s progress in its turnaround plan for Fortis in India.

“For a second straight quarter, Fortis delivered an operational profit before tax, while also achieving higher revenue and bolstering its balance sheet. Management remains fully confident that this transformational acquisition continues to be accretive for IHH in years to come.”

He added that the group is still proactively paring its non-Lira debt for Acibadem, its Turkish healthcare institution, and this has reduced the impact of forex volatility on its earnings. In Greater China, the group is still ramping up Gleneagles Hong Kong, and will be opening Gleneagles Chengdu and Gleneagles Shanghai over the next 18 months.

Going forward, the group plans to diversify its earnings base in cashflow-generative markets such as Singapore and Malaysia. Given its geographic footprint across Asia, Central and Eastern Europe, as well as Middle East and North Africa, the group said it is susceptible to geopolitical risks and currency volatility.

“In particular for Turkey, we expect the ongoing political uncertainty to weigh on the economic activity of the country, which will result in currency fluctuations. We also expect regulatory risks arising from impending price controls in Malaysia, Singapore and India which may potentially impact the group’s profitability.”

Shares in IHH Healthcare closed flat at S$1.85 on Friday. The company is also dual listed on Bursa Malaysia.