Strategic Report CEO’s Message

In a year of unprecedented challenges, our people enabled us to perform resiliently. Their dedication and tenacity inspired us to overcome all adversity and give the best of ourselves.

Dr Kelvin Loh Chi-Keon Managing Director and Chief Executive Officer

IHH Healthcare Berhad 26 Annual Report 2020 Dear Stakeholders, Leveraging our scale as an international globally while nurturing trust and seizing healthcare network, we have also opportunities to grow and create value for Like much of the world, IHH was been harnessing significant synergies the long term. Please read pages 51 to 57 buffeted by the winds of COVID-19 such as sharing IT services, talent for more information on the operations this past year. Although the pandemic management, global procurement of these markets. situation continues to evolve and produces and other administrative functions. uncertainty and stress in our communities as a Group, we performed resiliently With costs bound to continue rising We have been pursuing growth amidst the challenges. Throughout 2020, in the future, we have been managing on an organic basis. We do this via we stood by our colleagues on the our cashflow prudently and maintaining a two-pronged strategy approach. frontline of the pandemic battle, capital discipline. In 2020, we deferred Firstly, through our metro cluster strategy, supported the public healthcare systems all non-critical capital expenditure we continue to pursue “Centres of in our home and key markets, and scheduled for the year. This included Excellence” in our hub hospitals to deepen continued delivering unrivalled care delaying the opening of a new block specialisations and to grow more and building trust. Striding into the of our Pantai Ayer Keroh Hospital efficiently. Testament to that, we completed “next normal” ahead, we are confident in Malacca, Malaysia and the opening of our acquisition of Prince Court Medical we can harness synergies for our network Parkway Shanghai Hospital in Shanghai, Centre (PCMC) in September 2020. of 80 hospitals and generate sustainable to 2022. Consequently, we remain With PCMC added to our Malaysia’s long-term growth. financially robust, with a strong cashflow portfolio, we now operate three hub and sufficient secured lines of credit to hospitals within the Klang Valley in A Year of Resilience and Trust draw from should we need to do so. . This gives us significant Our challenges in 2020 were on leverage to extract synergies to bolster two fronts: combating a healthcare While our operations were impacted our service offerings and deepen crisis and operating efficiently while by the pandemic, particularly in April our specialities in each hub hospital. maintaining excellence in our healthcare and May, we saw a firm recovery from This enables us to offer improved quality delivery. The early realisation that our the third quarter onwards. Hospital of care for our patients and reach the usual revenue sources would be under occupancy recovered to between 50% fast-growing middle-income segments. pressure saw us adapting quickly to and 65%. Revenue intensity improved diversify revenue streams by expanding in Malaysia, , , with Turkey Secondly, we will be focusing on driving our service offerings, such as providing seeing a rise in foreign patient numbers bed occupancy as well as re-engineering COVID-19 treatments and doing more from June 2020 as travel restrictions our services to provide treatments for than 1.5 million COVID-19 related tests were eased. common procedures at our spoke hospitals across our network by early 2021. located within the suburban clusters. We continued to see recovery across This will enable us to extend our reach We cooperated with the governments all markets and ended 2020 with to the rapidly growing ranks of middle in countries where we operate to help resilient earnings amid the pandemic. class. At the same time, it delivers a them manage the health crisis. In Malaysia, Our Group Revenue for the full year higher quality of care and an improved for example, our Pantai and Gleneagles of 2020 was down 10% year-on-year response to the healthcare needs of Hospitals committed 10% of our beds to to RM13.4 billion from RM14.9 billion. the local community. treat COVID-19 patients in addition to Earnings before Interest, Taxes, 200 beds to assist the public healthcare Depreciation, Amortisation, Foreign By adopting this two-pronged strategy, system to treat non-COVID-19 patients. Currency Exchanges and other we can better serve the needs of the Through such public-private partnerships, non-operational items (EBITDA) community and build greater trust we stayed true to a basic tenet of decreased 13% to RM2.9 billion, between patients and payors while our Refreshed Strategy: fostering compared with RM3.3 billion in 2019. improving our earnings through trust with our stakeholders – patients, Our Profit After Tax and Minority operational efficiencies. employees, partners, investors – as well Interests (PATMI) came in at as governments. RM288.9 million, a decrease of 48% year-on-year. Excluding exceptional Another important initiative was our items, PATMI stood at RM715.3 million, rolling out of telemedicine across all a drop of 22%, year-on-year. our markets in May 2020. In this way, our patients can now enjoy faster, better, Across our key markets, operational easier and more cost-effective care performances reflect our strategy of from the safety of their homes. improving locally and synergising

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IHH, in partnership with the company We continue to focus on achieving the best clinical Accredify, has been issuing tamper-proof outcomes relative to cost which is part of our Value digital COVID-19 test result documents Driven Outcome (VDO) initiative for our patients. for travellers taking pre-departure swab tests since November. We plan to integrate Accredify’s block-chain technology into our healthcare networks When the pandemic started early last in overseas markets. year, we reacted swiftly to respond to the healthcare needs of the country. In line with IHH’s vision of becoming In the beginning we helped in the the leading healthcare services provider, health crisis by loaning public hospitals we continue to focus on achieving the ventilators and committed 200 beds best clinical outcomes relative to cost as to non-COVID-19 patients decanted part of our VDO initiative for our patients. from public hospitals. The country’s This is to improve the transparency of health authority also authorised clinical outcomes and optimise costs Gleneagles and Pantai hospitals around within our private healthcare system. Kuala Lumpur and Melaka to perform With VDO, we can improve the quality on-demand swab testing for COVID-19. of care for patients whilst optimising When private hospitals were allowed to healthcare costs. For some time now, treat COVID-19 patients in early 2021, we have been strengthening our we also commited 10% of beds to reputation among patients in our the cause. hospitals through improving price transparency. Our Price Guarantee Through our public private partnerships, Procedures, enabled by an Artificial we were able to contribute to the battle Intelligence (AI)-driven hospital bill against COVID-19. estimating system with 80% accuracy, are an example of patients seeing greater Singapore price transparency and bill certainty for The challenges of the pandemic created common medical procedures. more opportunities for IHH to collaborate with the Singapore government and We have also embarked on the journey strengthen trust in this home market. to move ambulatory centres outside To lighten the patient load in public of the hospitals. For example, we hospitals, we treated a number of COVID-19 relocated the rehabilitation services patients. In January, many of our frontline out of Mount Elizabeth Novena Hospital colleagues sacrificed Chinese New Year so that the hospital can make space celebrations with their families to do and focus on providing higher acuity temperature screening for incoming services for our patients. visitors to Singapore at land and sea border checkpoints. Some colleagues Continuing IHH’s trajectory to from corporate functions and backend advance our service offerings to operations worked alongside nurses become a “super specialisation hub”, on the frontline to conduct swab testing Mount Elizabeth Novena Hospital will while others took part in COVID-19 open its Proton Beam Therapy Centre operations at the Community Care Facility in 2022. Proton beams are used for at Singapore Expo, migrant worker precision cancer treatment and can dormitories, regional screening centres kill cancer cells with far less damage and swing facilities that offered short-term to surrounding healthy tissues and patient care without tying up hospital other organs. beds and other resources over a long period.

IHH Healthcare Berhad 28 Annual Report 2020 Turkey and Central and India Eastern Europe During the year, to support India’s In Turkey, our hospitals supported the public healthcare system, our hospitals public healthcare system by caring for have been at the forefront of the war COVID-19 patients. We also boosted against COVID-19 including the treatment our capacity to process COVID-19 swab of many patients with low mortality risk, tests to help with the country’s mass designation of 1,500 beds across the testing strategy. Besides working with network and conducting laboratory the government to care for COVID-19 testing. In April, Fortis Hospital, patients, our Turkey and Central and Bannerghatta Road brought in the Eastern Europe Operations continued Mitra robot for COVID-19 screening. to ramp up capabilities. Acibadem Such initiatives have helped to strengthen Altunizade Hospital and Acibadem trust between us and our local patients. Maslak Hospital took such steps to better serve domestic and foreign Part of IHH’s Refreshed Strategy patients even during the pandemic. involves reviewing our portfolio and capital deployment to prioritise returns. With the Group’s ongoing strategy to In line with this, we entered into a reduce our foreign currency exposure share purchase agreement to divest in this region, Acibadem has significantly our entire 50% equity interest in the lowered its unhedged non-Lira debt in Apollo Gleneagles Hospital joint venture 2020 to 37 million euros through cross in November to monetise a non-core currency swaps (CCS) and prepayment asset and recycle capital to help us grow of debt. This is down from 288 million efficiently via our Cluster Strategy. euros at the end of 2019. As a result, we expect the drag on Acibadem’s In 2020, we continued to drive ongoing earnings to be greatly reduced. cost optimisation and improve productivity Our Turkish operations will focus on across functions and facilities. As India growing via the cluster strategy and is a highly regulated and competitive improving its operations. Leveraging market, it is important for us as a Group its strong Acibadem brand, we will to utilise our global scale to develop continue to de-risk growth by pursuing operating leverage. This will help us Euro-denominated revenue. Over the see reasonable cost savings play years, we have established a strong out in the short to medium term and beachhead into the European markets improve margins. with our European assets in Macedonia, Bulgaria and Netherlands, all of which In 2020, the Fortis board has given have been performing well even during in-principle approval to change the name the challenging times of COVID-19. of the company and its subsidiaries to “Parkway” in relation to the hospital Given its significant experience in business, so as to leverage the mindshare tracking clinical outcomes, Acibadem associated with the Parkway brand. is now contributing towards the Group’s This rebranding is subject to approvals VDO intiative by sharing best practices from the Supreme Courts. Once approved, and knowledge. These developments we expect the initiative to enhance our tie in with Acibadem’s own continuing goal of harnessing synergies throughout efforts to deepen its clinical offerings. our global network.

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Greater China available medical and health services. Despite the onset of COVID-19, Gleneagles IHH will continue to manage its cash Hospital (GHK) has seen burn rate pari passu to the ramp-up progressive growth in inpatient volume as we introduce more comprehensive throughout 2020. The fourth quarter of procedures and services. 2020 proved to be the strongest quarter in revenue for GHK to date, both in terms Parkway Shanghai Hospital, the of growth in patient volumes, and improved construction of which was delayed revenue intensity. Operational losses due to the pandemic, is now expected have been narrowing as the hospital to open in 2022. operations continue to improve. At the end of 2020, GHK was running at an China remains a high potential market average occupancy rate of 63%, based as the demographic is changing and on about 200 operational beds. We target we are seeing an increasing uptake for GHK to achieve EBITDA break-even in from the country’s middle class for 2021, provided that Hong Kong does not private healthcare. remain in protracted lockdown. Our People, Our Inspiration To support the public health system The face-off with the unprecedented in Hong Kong, GHK introduced its challenges of 2020 demonstrated our patient engagement mobile application, agility and ability to rebound. At the “My Gleneagles SmartHealth”. It also heart of this resilience are our people – empowered staff to back the Hong Kong colleagues on the frontline, those working government’s efforts in identifying silent behind the scenes, and our corporate COVID-19 carriers in the community and management teams. Their dedication via the Universal Community Testing and tenacity underpin everything we do. Programme. Furthermore, the hospital launched discounted all-inclusive Being a medical professional myself, packages and special maternity offers I understand the pressures and challenges to help public hospital patients amid the of the profession and 2020 was rife with COVID-19 outbreak. them. I would therefore like to extend my personal thanks to each and every As for China, operations have gradually colleague for going beyond the call of recovered from the lows during COVID-19. duty and being an inspiration to us all. Gleneagles Chengdu Hospital, which opened in late October 2019 has 30 Doing the right thing for patients is operational beds as at 31 December 2020 crucial for our business. It is with our with key specialities such as Cardiovascular, common purpose of “Touching Lives. Gastrointestinal, Orthopaedics and Transforming Care.”. Underpinned by our Paediatrics. The ramping up of operations five core values of: Putting Patients First, has been hampered by the COVID Integrity, Empathy, Teamwork and pandemic since January 2020. However, Excellence, and tenacity of delivering to make medical care more accessible excellent healthcare that we are able to and convenient to our patients, the ask patients to entrust their health to us. hospital leveraged innovation to transform It is with the same purpose and tenacity care for our patients by providing one-stop we have when delivering health care services on WeChat. Patients can enjoy that we drive our business, while quick access to online appointments and ensuring our operations reflect our information about our physicians and five core values.

IHH Healthcare Berhad 30 Annual Report 2020 Adapting to the Next Normal It is with the same sense of purpose and tenacity Currently IHH’s geographical footprint gives us earning resilience as some of we have when delivering healthcare that we drive our key markets are on the pandemic our business, while ensuring our operations reflect recovery path even as others are experiencing a resurgence of COVID-19 our five core values of: Putting Patients First, Integrity; cases. There are roll-outs of tested Empathy, Teamwork and Excellence. and approved vaccines and we have reason to believe that the health crisis might be alleviated in 2021. Despite increasing our investment Appreciation To stay relevant moving into the next in medical technology and equipment, When I took the helm as MD and CEO normal, we must align ourselves with we are striving to keep medical cost at IHH at the start of 2020, COVID-19 three major trends that have started inflation in check by leveraging our had already been detected in some to shape our industry: healthcare operational scale to amortise costs. countries. Throughout the year, I had being delivered digitally where We must be transparent with patients the good fortune of working with possible; rising demand by healthcare about how their money will be spent remarkable colleagues to surmount consumers for greater transparency; so they can better understand the value various challenges and execute and better public-private partnership they will be getting at any price point. IHH’s mission of providing exemplary and collaboration. This action builds trust, which in turn care for our patients. At the same time, leads to patients returning to us we were committed to optimising value Even prior to the outbreak of COVID-19, to address their medical concerns. for all stakeholders and building trust we had already been offering more Post COVID-19, the need for transparency among them. As a team, we faced healthcare services digitally. One example will be greater than ever and I am up to the problems caused by the is the release of two mobile apps by pleased that IHH has taken the lead pandemic and, despite strong in Singapore in 2Q 2019: in this area, particularly in Singapore unavoidable headwinds, we coped Parkway DigiHealth app for patients and and Hong Kong. relatively well and have emerged Parkway DigiCare for specialist doctors. stronger overall. Parkway DigiHealth allows patients to The pandemic this past year also book appointments and, in time, manage illustrated the importance of public I now have the responsibility but them while enjoying faster access to and private sectors working together also the privilege to steer a clear their laboratory results and medical to deal with a health crisis. In all our course for IHH’s further development records. Created to enhance efficiencies home and key markets, IHH stood by post-COVID-19. With your collaboration and allow doctors and their teams to the various governments in their fight and continued support of my stewardship focus fully on patient care, Parkway against the virus in significant ways. and our vision, and IHH’s culture of trust DigiCare gives accredited specialists We intend to forge more of these and core of resilience, I am confident that quick and convenient access to important partnerships in future. IHH is advancing towards a new horizon. Parkway related services. As COVID-19 accelerated our efforts Thank you. The COVID-19 pandemic has no doubt to innovate, leverage synergies and accelerated the necessity for delivering build platforms for growth, we now Dr Kelvin Loh Chi-Keon healthcare digitally as patients need to have the momentum to continue in the Managing Director and same direction. This means adopting get information more quickly and without Chief Executive Officer visiting hospitals if possible. In response, disruptive technology where necessary we rolled out our telemedicine initiative to sharpen our medical capabilities across our network in May 2020 to and stay relevant to the market, as well complement our bricks-and-mortar as continuing to apply our Refreshed business as well as to make receiving Strategy in our quest to become healthcare diagnosis and advice more the world’s most trusted healthcare convenient for patients. services network.

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