IHH Healthcare sinks into the red with RM319.8m loss

IHH Healthcare sank into the red for the first quarter to March, weighed down by impairment on an investment in India and foreign currency translation losses.

The Malaysia-registered hospital operator, which is dual-listed on both sides of the Causeway, reported a loss of RM319.8 million (S$104.3 million) for the FY2020 first quarter, against earnings of RM89.5 million a year ago. Loss per share was 3.9 sen, versus earnings per share of 0.78 sen for the preceding year.

IHH's revenue was RM3.56 billion or marginally 2 per cent lower year on year than RM3.64 billion, said the operator in a regulatory filing to Singapore Exchange on Monday.

No dividends were proposed. Net assets per share stood at RM2.45 as at March 31, down from RM 2.55 three months ago.

Impairment of goodwill over Global Hospitals amounting to RM400.5 million and foreign currency translation losses amounting to RM60 million (from the substantive liquidation of Khubchandani Hospital) contributed to IHH's losses. These hospitals are in India.

Balance sheet "remained strong", with net cash generated from operating activities of RM463.3 million and an overall cash balance of RM5.4 billion, IHH added.

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Net gearing edged up to 0.17 times from 0.15 times a quarter ago, as debts were taken to finance working capital and for capital expenditure.

IHH expects an impact from the Covid-19 pandemic for FY2020. Already, it reported that patients postponed non-urgent and non-essential treatment as well as made fewer visits to hospitals and healthcare facilities. Its foreign patient volume also fell, especially from March onwards, due to the various travel restrictions implemented across the countries that it operates.

The decrease in revenue as a result of lower patient volumes is partially mitigated by Covid-19-related services that IHH renders. It is in active collaboration with the public healthcare sector to provide Covid-19 screening services and laboratory testing in Malaysia and Singapore, to care for stable Covid-19 patients decanted from public hospitals to IHH's Singapore hospitals and to perform temperature screening at the Singapore borders.

In addition, its hospitals in Turkey and India receive some walk-in Covid-19 patients. It also receives non-Covid-19 patients decanted from public hospitals.

The group expects higher costs of operations from the disruption in supply chains due to the pandemic, and wage inflation from continuing competition for skilled healthcare personnel in its home markets.

While such cost pressures may potentially reduce its Ebitda and margins, IHH expects to partially mitigate these effects through diversifying into new revenue streams, improvements in case mix and tight cost control. "The group also continues to drive efficient growth, unlock intrinsic value and drive cost savings through global shared services and procurement, " IHH said in the filing. 

With the slowdown in patient volumes brought about by the pandemic, IHH has reviewed its capital expenditure to defer non-critical purchases and non-critical capital-expansion projects. In addition, the construction of Parkway Shanghai Hospital (formerly known as Gleneagles Shanghai Hospital) in China will be delayed as a result of halting of construction during the lockdown.

IHH expects an impact from the Covid-19 pandemic for FY2020, and believes that a prolonged fallout from Covid-19 may further dampen its performance. In particular, the Covid-19 infection curve has not peaked in certain markets like India.

However, with the gradual easing of movement restrictions from June, IHH has noted a recovery in local patient volumes. It expects patient volumes to continue recovering, save for any disruptions from subsequent waves of Covid-19 outbreaks and renewed lockdowns.

"The group has a strong cash balance and sufficient financing facilities to draw upon should the need arise, " said IHH.

IHH ended at S$1.78 or up S$0.03 on Monday, before the financial results were released.