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IHH Healthcare Q4 net profit falls 15%, announces strategy refresh

HIGHER net interest expenses and depreciation from new hospital projects were a drag on IHH Healthcare's core profit in the fourth quarter, but new chief executive and managing director Kelvin Loh has announced a strategy refresh and portfolio review to make 2020 a "year of change".

Fourth-quarter net profit excluding exceptional items fell 15 per cent year-on-year to RM289.8 million (S$96 million) as additional loans were taken for the Fortis acquisition, working capital and the swapping of subsidiary Acibadem's euro bank loans and interest into Turkish lira, which is higher.

Net profit in the three months ended Dec 31, 2019 was RM40.6 million, down 92 per cent from the same period a year earlier.

Revenue rose 21 per cent to RM3.8 billion on sustained organic growth from existing operations and the continuous ramp-up of Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital, both of which opened in March 2017. Contribution from the increased capacity at Acibadem Maslak Hospital (expansion completed in October 2018) and Amanjaya Specialist Centre (acquired in October 2018) as well as Fortis (acquired in November 2018) also contributed to the increase.

Earnings before interest, tax, depreciation, amortisation, exchange differences and other non-operational items (ebita) rose 25 per cent to RM901.5 million.

Fourth-quarter earnings per share was 0.21 sen, down 96 per cent from 5.78 sen in the same period a year earlier.

Full-year earnings per share was 5.28 sen in 2019, down 19 per cent from 6.54 sen in 2018.

Full-year net profit was RM551.5 million in 2019, down 12 per cent from 2018. Stripping out exceptional items, net profit fell 10 per cent to RM920.7 million on higher net interest expenses, foreign exchange losses and fair-value losses on forward-exchange contracts.

Looking ahead, the group said it has managed its forex volatility as non-lira debt has been significantly reduced.

A first and final dividend of four sen per share will be paid on Apr 30, up 33 per cent from three sen in 2018.

In his first-ever earnings call, Dr Loh said that IHH is entering its "next phase of growth" to become the world's most trusted healthcare services network.

As part of its refreshed strategy, IHH will focus on growth by expanding its established clusters in metro areas to achieve greater economies of scale, he said.

IHH will also review its asset portfolio and divest underperforming assets outside of its focus clusters to redeploy capital to improve returns. It will also leverage its international scale to achieve stronger synergies. For instance, it recently did a global procurement of cardiac angioplasty machines to save about US$10 million over the next few years.

IHH shares fell one cent or 0.53 per cent to close at S$1.87 on Friday before the results were announced.