Raffles Medical posts 63.8% drop in H2 profit to S$30.3 million; looks to China, Japan growth
RAFFLES Medical Group posted a 63.8 per cent drop in net profit to S$30.3 million for the second half ended Dec 31, 2023, from S$83.7 million in the previous corresponding period.
The group attributed the weaker performance to the discontinuation of Covid-19-related activities in FY2023, it said on Monday (Feb 26).
The results translate to earnings per share (EPS) of 1.63 Singapore cents against EPS of 4.51 cents previously.
Meanwhile, revenue was down 18.6 per cent on the year to S$336.2 million from S$413.2 million.
The board has proposed a final dividend of S$0.024 per share, down from the S$0.038 per share declared for the same period a year earlier.
For the full year ended Dec 31, 2023, net profit was down 37.1 per cent year on year to S$90.2 million, from S$143.2 million, translating to an EPS of 4.85 cents.
Revenue for the full year fell 14.1 per cent to S$706.9 million from S$822.9 million, following a drop in contributions from its healthcare services segment.
The segment posted a revenue of S$283.4 million, 36.3 per cent lower than the S$445 million recorded the year before, which included revenue from Covid-19-related activities.
Despite the post-Covid fall, Raffles Medical executive chairman Loo Choon Yong said that the full-year revenue and bottom line had grown compared with 2019, the last full year before the exceptional pandemic.
Its full-year top line then was S$522 million, while its net profit was S$58.1 million.
“With Covid, we had a lot of things to do, but these things will not go on forever,” said Dr Loo at a media briefing after the results release.
That said, Raffles Medical continues to collaborate with the health ministry and operate transitional care facilities at Singapore Expo and Raffles Hospital, aiming to alleviate the bed crunch at public hospitals.
Although business has normalised, Dr Loo noted that more medical tourists are heading to other countries for treatment, due to Singapore becoming increasingly expensive with a stronger currency relative to regional peers.
That said, the “top end” of patients in the region will still come to Singapore, he said. “They want quality service, and they’re prepared to pay for it.”
Digging into China, Japan
In this vein, instead of overseas patients coming to Raffles Medical, the group has decided to go to them, he quipped.
Revenue in its Greater China segment, which includes three hospitals in Shanghai, Chongqing and Beijing, has increased, climbing 18.1 per cent for the full year to S$59.3 million, from S$50.2 million.
While the group is seeing higher patient numbers in its Chinese outposts over the last year, its Shanghai and Chongqing hospitals are still developing and incurred gestational losses in FY2023.
Following the lifting of movement restrictions in China, the company has also commenced rightsizing and rationalising of its China operations to achieve “better operating opportunities” – an ongoing process as post-Covid operations normalise, noted Dr Loo.
He is bullish on the company’s overseas expansions, highlighting the group’s forays into Japan.
In January, the group completed the acquisition of the remaining 49 per cent of its Japanese subsidiary from its joint venture partner Socion Healthcare Management.
The subsidiary owns and operates Raffles Medical’s medical centre in Osaka, and will be adding more branches in Fukuoka and Tokyo in the next two years.
“Now that we own 100 per cent (of the subsidiary), we can move faster and we will be expanding in Japan more significantly,” he said, adding that the group will focus on medical centres and clinics as hospitals in Japan are required to be non-profit.
In terms of financing acquisitions, chief financial officer Sheila Ng said the group has enough on its balance sheet to do so without having to raise equity.
Cash and cash equivalents as at Dec 31, 2023, stood at S$342.5 million.
She added that the group may also consider a business model that is asset light for expansions in its existing operations.
Dr Loo said: “In a city like Shanghai, you could have several hospitals. The second or third hospitals certainly do not have to be built – you can lease buildings and convert them into hospitals.”
The group could also look to running specialist hospitals or medical centres to complement its available services in such cities, he said.
Overall, the group has “high single-digit growth and margins” overseas, and aims to reach steady, “high double-digit growth” in its non-Singapore operations, he said.
“When we go overseas, we need to make sure that there is a premium… we are looking at double digits for sure, and the business must be capable of doing that.”
Shares of mainboard-listed Raffles Medical were trading at S$1.02, down 2.9 per cent or S$0.03, as at 1.20 pm on Monday, after the results were announced.
