IHH Healthcare Berhad Annual Report 2012 47 MANAGING DIRECTOR’S Review of Operations IHH Healthcare Berhad MANAGING dIRECTOR’S Annual Report 2012 REVIEW OF OPERATIONS 48 Dear Shareholders, I am pleased to report that despite a challenging global economic backdrop, IHH Healthcare Berhad (“IHH” or the “Group”) made strong strides forward and delivered robust performance across key financial and operational metrics in Financial Year 2012 (“FY 2012”). Our success is all the more satisfying given that this was our maiden year as a listed-entity. Managing Director Dr Lim Cheok Peng IHH Healthcare Berhad Annual Report 2012 49 IHH Healthcare Berhad MANAGING dIRECTOR’S REVIEW OF OPERATIONS Annual Report 2012 50 For the financial year ended 31 December 2012, the Group’s first full-year of results, we more than doubled our revenue as well as earnings before interest, tax, depreciation, amortisation, exchange differences and other non-operational items (“EBITDA”). Revenue rose 110% to RM7.0 billion year-on-year (“YoY”) and EBITDA by 109% to RM1.4 billion YoY. The Group’s rapid growth in FY 2012 was underpinned by three key factors, namely, consistent growth across all existing operations; the consolidation of Acibadem Holding (“Acibadem”) from 24 January 2012; and the one-time sale of 216 medical suites at the new Mount Elizabeth Novena Hospital and Specialist Centre in Singapore (“Mount Elizabeth Novena”). Stripping out the sale of medical suites, we still registered solid growth of 73% and 69% respectively with regard to our full-year revenue and EBITDA. Excluding exceptional items, our profit after tax and minority interests (“PATMI”) for FY 2012 rose 56% to RM686.6 million on the back of the strong EBITDA growth. Finance costs dropped after IPO proceeds were used to pay off Parkway Pantai Limited’s (“Parkway Pantai”) acquisition loan, and these savings contributed to PATMI. However, higher depreciation expenses and finance costs associated with Mount Elizabeth Novena offset some of these savings. The Hospital segment was the main contributor to business growth, making up almost three quarters of Group revenue (73%) and EBITDA (72%) for FY 2012, excluding the RM1.2 billion revenue and RM265.0 million EBITDA from the one-time sale of the Mount Elizabeth Novena medical suites. Overall, we maintained EBITDA margins at 19.7% for FY 2012 (against 19.8% for the preceding year), even as we continued to invest significantly in capacity expansion. IHH Healthcare Berhad MANAGING dIRECTOR’S REVIEW OF OPERATIONS Annual Report 2012 51 CONSISTENT GROWTH ACROSS ALL PLATFORMS Parkway Pantai grew revenue by 50% to The Group’s existing operations turned in strong performances in FY 2012 on the back of robust fundamentals. Parkway Pantai, our largest operating subsidiary, achieved a 50% increase in its RM4.8 full-year revenue to RM4.8 billion and a 61% increase in EBITDA to RM998.0 million. Excluding billion effects of the sale of the Mount Elizabeth Novena medical suites, revenue and EBITDA for FY and EBITDA by 61% to 2012 still grew a healthy 12% and 18% respectively to RM3.5 billion and RM733.0 million. RM998.0 The steady earnings growth in FY 2012 was achieved via higher revenue intensities on top of million rising inpatient admissions. Revenue intensities for FY 2012 grew approximately 11% and 5% per inpatient admission in Malaysia and Singapore respectively due to the higher number of complex cases undertaken by hospitals. Acibadem turned in revenue of The strong demand for quality healthcare services in the region continued to drive patient volumes. Parkway Pantai’s hospitals were able to capitalise on this trend and raise full-year RM2.1 inpatient admissions by 4% in Malaysia and 8% in Singapore, the latter benefitting from the billion capacity boost and growing contributions from Mount Elizabeth Novena. All in all, Mount and EBITDA of Elizabeth Novena achieved revenue of RM51.7 million for FY 2012, ending the year with pre- operating and start-up losses of RM84.2 million. RM330.4 million Acibadem contributed 11 months in revenue of approximately RM2.1 billion and EBITDA of RM330.4 million in the year under review. Revenue for Acibadem was boosted by strong IMU Health recorded a performance from existing hospitals as well as contributions from new hospitals in Bodrum & revenue rise of 10% to Ankara. RM174.8 Our medical education arm, IMU Health, recorded a revenue rise of 10% in FY 2012 to RM174.8 million million. The growth came on the back of higher student enrolment in most existing and new academic programmes. ACQUISITION OF ACIBAdEM On 24 January 2012, IHH completed the acquisition of an indirect 60% equity interest in Acibadem in exchange for cash and shares for a total fair value consideration of approximately US$826.3 million. The deal was satisfied by a cash payment of approximately US$262.9 million and the issuance of IHH shares valued at approximately US$550.5 million. Acibadem, which began its hospital operations in 1991, currently operates 15 hospitals across Turkey and one in Macedonia. Its hospitals have 1,991 beds in total and employ over 1,800 doctors across 40 specialty areas. IHH Healthcare Berhad MANAGING dIRECTOR’S REVIEW OF OPERATIONS Annual Report 2012 52 The incorporation of Acibadem into the Group’s stable of healthcare assets has enabled us to The incorporation leapfrog into an entirely new region. Right from the start, there have been common synergies. of Acibadem into Acibadem’s operations in Turkey are almost a mirror image to Parkway Pantai’s operations in the Group’s stable of Malaysia and Singapore. Akin to IHH's business in Singapore and Malaysia, the Turkish business healthcare assets has not only targets the population in its domestic market but also benefits from a strong uptrend enabled us to leapfrog of medical tourism from across the Central & Eastern Europe, Middle East and North Africa into an entirely new (“CEEMENA”) region. Further synergies are being created throughout the Group even as best region. practices are adopted between one market and another and cost efficiencies are optimised especially in the area of procurement. The addition of Mount Our stake in Acibadem has opened up a wealth of opportunities for the Group and we are very Elizabeth Novena to excited about our prospects going forward for a number of reasons. As a newly developed our stable of hospitals nation, Turkey serves as the ideal springboard to venture forth into new areas. On top of this, positions us strongly there are currently no other prominent private healthcare providers in this region. The past to address the growing conflicts in the surrounding areas such as in Eastern Europe, and more recently the fallout needs and expectations from the Arab Spring, as well as the rising affluence in neighbouring countries, also position of wealthy domestic Turkey as an attractive healthcare destination for medical tourists. With major shareholders’ patients and premium continued backing, we are confident of growing our footprint in the CEEMENA region as well medical tourists. as in Russia and the Turkic Republics. OPENING OF MOUNT ELIZABETH NOVENA The RM1.2 billion revenue from the (one-off) sale of medical suites at the Mount Elizabeth Novena Specialist Centre did much to bolster the Group’s performance in our maiden year. Commencing operations ahead of schedule on 28 June 2012, the fourth Singapore hospital of Parkway Pantai, is a very significant addition to the Group’s offering, not just in terms of boosting capacity and revenue but also in setting new benchmarks in clinical excellence. Boasting cutting edge facilities, top quality staff and medical expertise, this 333-bed premier healthcare facility underscores the Group's commitment to growing and strengthening our leading presence in Singapore and the region. IHH Healthcare Berhad MANAGING dIRECTOR’S REVIEW OF OPERATIONS Annual Report 2012 53 The 73,797 square metre complex is among Singapore’s most ambitious and comprehensive Mount Elizabeth medical facilities. Not only has it raised the bar for the nation’s healthcare system, it has already Novena has scored entrenched itself strongly among local private patients and the growing medical tourism several “firsts” since its market. The hospital’s 333-single-bed-only wards include 37 deluxe rooms, eight VIP rooms opening. These include and three suites. Mount Elizabeth Novena’s 13 operating theatres, including a hybrid theatre being the first private which allows for less invasive surgery, focus on heart and vascular diseases, orthopaedics, hospital in Singapore neurosciences and general surgery. With the addition of Mount Elizabeth Novena to our stable to roll out electronic of hospitals, the Group is well-positioned to address the growing needs and expectations of medical records; the domestic patients and medical tourists with the highest standards of care and service. first completed private Of the 254 medical suites, 216 have been made available to private medical specialists while hospital in Singapore to the rest have been set aside by Parkway Pantai for its own use and for rental. Even prior to the win the BCA Green Mark commencement of operations, 100% of the suites available for sale were taken up by medical Platinum Award; and the specialists, a sign of the confidence the medical community has in the project. first greenfield private hospital to be built in Mount Elizabeth Novena has scored several “firsts” since its opening. These include being the Singapore in more than first private hospital in Singapore to roll out electronic medical records; the first completed 30 years. private hospital in Singapore to win the BCA Green Mark Platinum Award; and the first greenfield private hospital to be built in Singapore in more than 30 years. OUR dUAL LISTING IHH’s dual listing on the main markets of Bursa Malaysia Securities Berhad (“Bursa Securities”) and Singapore Exchange Securities Trading Limited (“the SGX-ST”) was a landmark event for the year.