IHH Healthcare Q2 net profit up 27% on exceptional gain

MALAYSIAN hospital group IHH Healthcare : Q0F 0% reported a 27 per cent rise in its net profit for the second quarter ended Jun 30, due mainly to an exceptional gain of RM295.5 million (S$91.8 million). This arose from restating financial statements according to a reporting standards framework in hyperinflationary Turkey.

This brought net profit for the quarter to RM612.1 million, from RM483.3 million in the same period last year.

Stripping out the effect from the application of Turkey’s reporting framework, net profit is 17 per cent higher at RM566.2 million, said the group in a bourse filing on Thursday (Aug 25).

Net operating income fell 32 per cent to RM317.5 million due to lower EBITDA and adjustments relating to reporting standards in Turkey for depreciation and amortisation.

For the first half, net profit came in at RM1.1 billion, a 29 per cent increase from RM858.9 million in the year-ago period.

Revenue for Q2 grew marginally by 2 per cent to RM4.37 billion, from RM4.27 billion in the previous corresponding period.

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This brings its first-half revenue to RM8.54 billion, or 4 per cent higher year on year from RM8.22 billion.

Earnings per share for Q2 2022 rose to 6.69 sen, from 5.26 sen in Q2 2021. It now stands at 12.05 sen for the first half of the fiscal year, versus 9.29 sen in the year-ago period.

The group said growth came mainly from the recovery in core non-Covid-19 revenues as both local and foreign patients returned to seek treatment at its hospitals.

The continuous ramp-up of operations at Gleneagles Hong Kong Hospital and the acquisition of General Hospital Acibadem Bel Medic in Serbia last July also contributed to the revenue increase, although these were partially offset by lower contributions from Covid-related services rendered in the quarter, as well as effects from the disposal of Continental Hospitals in December 2021.

The weakening Turkish lira also eroded the revenue and EBITDA growth of the group’s Turkey operations.

In Q2, it entered into an agreement to sell its medical educational arm, International Medical University (“IMU”), for a total enterprise value of RM1.35 billion; proceeds will be deployed to optimise operations and clinical services and for investments “into new growth peaks”.

Pantai Hospital Penang also started building a new medical block, which is expected to be completed by end-2024.

In Turkey, the group signed an agreement for the purchase of Orthopedia Hospital in Adana in early August.

IHH Healthcare managing director and chief executive officer Kelvin Loh said in a statement that Q2 2022 was the group’s “Covid inflexion” quarter, with its core business recovering as patients returned in strength, offsetting the anticipated melt-off in Covid-19-related services.

“With strong cash flow and operating synergies, we are now embarking on further growth initiatives by exploring earnings-accretive opportunities and improving returns,” said Loh.

“While we expect near-term headwinds including inflation, higher interest rates and currency volatility, we are confident in our ability to provide long-term value for all stakeholders.”

The counter closed 3.7 per cent or S$0.07 higher at S$1.98, before the results announcement.