IHH Healthcare : Q1 2023 Quarterly Report

IHH HEALTHCARE BERHAD

(Incorporated in Malaysia)

INTERIM FINANCIAL REPORT

31 MARCH 2023

IHH HEALTHCARE BERHAD

Registration No. 201001018208

(Incorporated in Malaysia)

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FIRST QUARTER AND FINANCIAL PERIOD ENDED 31 MARCH 2023

	Note	1st quarter ended
	31 Mar 2023	31 Mar 2022	Variance
		RM'000	RM'000	%
Revenue	1	5,142,406	4,163,058	24%
Other operating income	2	1,104,441	99,468	NM
Inventories and consumables		(1,043,322)	(862,197)	-21%
Purchased and contracted services		(464,166)	(378,952)	-22%
Staff costs	3	(1,905,809)	(1,507,117)	-26%
Depreciation and impairment of property, plant and equipment	4	(266,021)	(222,544)	-20%
Depreciation and impairment of right-of-use ("ROU") assets	4	(92,253)	(77,072)	-20%
Amortisation and impairment of intangible assets	4	(11,141)	(10,239)	-9%
Operating lease expenses		(27,507)	(20,065)	-37%
Other operating expenses	5	(669,860)	(495,291)	-35%
Finance income	6	39,588	50,233	-21%
Finance costs	6	(185,221)	(126,564)	-46%
Net monetary gain from hyperinflationary economy		164,758	-	-
Share of profits of associates (net of tax)		6,113	7,860	-22%
Share of profits of joint ventures (net of tax)		502	570	-12%
Profit before tax		1,792,508	621,148	189%
Income tax expense	7	(240,544)	(51,088)	NM
Profit for the period		1,551,964	570,060	172%
Other comprehensive income, net of tax
Items that are or may be reclassified subsequently
to profit or loss
Foreign currency translation differences from	8	50,059	(216,658)	123%
foreign operations
Realisation of FCTR1 upon disposal of subsidiaries		10,726	-	-
Hyperinflationary adjustments		538,135	-	-
Hedge of net investments in foreign operations	8	322,076	130,473	147%
Cash flow hedge		(9,774)	7,906	NM
Cost of hedging		(430)	771	-156%
		910,792	(77,508)	NM
Items that will not be reclassified subsequently
to profit or loss
Remeasurement of defined benefit liabilities		(1,073)	1,282	-184%
Total other comprehensive income for the period, net of tax		909,719	(76,226)	NM
Total comprehensive income for the period		2,461,683	493,834	NM
Profit attributable to:
Owners of the Company		1,390,519	493,259	182%
Non-controlling interests		161,445	76,801	110%
Profit for the period		1,551,964	570,060	172%
Total comprehensive income attributable to:
Owners of the Company		2,239,610	466,887	NM
Non-controlling interests		222,073	26,947	NM
Total comprehensive income for the period		2,461,683	493,834	NM
Earnings per share (sen)
Basic		15.79	5.36	195%
Diluted		15.79	5.35	195%

NM: Not meaningful Note:

1. Foreign currency translation reserve

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IHH HEALTHCARE BERHAD

Registration No. 201001018208

(Incorporated in Malaysia)

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE FIRST QUARTER AND FINANCIAL PERIOD ENDED 31 MARCH 2023

SUPPLEMENTARY INFORMATION

		1st quarter ended
	Note	31 Mar 2023	31 Mar 2022	Variance
Profit attributable to owners of the Company,		RM'000	RM'000	%
excluding Eivii		329,866	407,423	-19%
Add/(Less): Exceptional items ("EI")
Gain on disposal of subsidiariesi	2	981,417	-
Impairment of assets reversedii		-	4,402
Change in fair value of cross currency swapsiii	6	(9,077)	18,701
Exchange gain/(loss) on net borrowingsiv	6	16,225	(29,587)
Deferred tax benefitsv	7	-	101,137
Net monetary gain from hyperinflationary economyvi		164,758	-
		1,153,323	94,653
Less: Tax effects on EI		(1,644)	2,722
Less: Non-controlling interests' share of EI		(91,026)	(11,539)
		1,060,653	85,836
Profit attributable to owners of the Company				182%
	1,390,519	493,259
Earnings per share, excluding EIvii (sen)
Basic		3.75	4.38	-14%
Diluted		3.75	4.38	-14%

Note:

"Acibadem Holdings" as referred to throughout this financial report includes the wholly owned Integrated Healthcare Turkey Yatirimlari Limited Group, which owns approximately 90% interest in Acıbadem Sağlık Yatırımları Holding A.Ş. Group.

1. Gain on disposal of IMU Health Sdn Bhd and its subsidiaries (collectively, "IMU Health") of RM862.1 million, and Gleneagles Chengdu Hospital Company Limited ("Gleneagles Chengdu Hospital") of RM119.3 million.
2. Reversal of impairment of assets of Gleneagles Chengdu Hospital upon receipt of recoverables.
3. Fair value changes of the cross-currency swaps which was entered to hedge a portion of Acibadem Holdings' foreign currency denominated borrowings.
4. Exchange differences arising from foreign currency denominated borrowings/payables net of foreign currency denominated cash/receivables, recognised by Acibadem Holdings. (As at 31 March 2023, Euro/TL = 20.845)
5. Deferred tax assets arising from indexation of property, plant and equipment in statutory books as allowed by the Turkey government due to spike in inflation.
6. Net increase in purchasing power from the net monetary position of the Group's operations in Turkiye, upon the application of MFRS 129, Financial Reporting in Hyperinflationary Economies
7. Exceptional items, net of tax and non-controlling interests

The unaudited Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the 2022 Audited Financial Statements and the accompanying explanatory notes attached to this financial report.

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IHH HEALTHCARE BERHAD

Registration No. 201001018208

(Incorporated in Malaysia)

EXPLANATORY NOTES TO THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

The Group's reported results were impacted by the relative movements in Ringgit Malaysia ("RM") against the exchange rates of the countries that the Group operates in. The RM weakened against Singapore Dollars ("SGD") and strengthened against Turkish Lira ("TL") in the current period as compared to the corresponding period last year.

In addition, the Group's reported results for Q1 2023 included the application to the Group's entities in Turkiye of MFRS 129, Financial Reporting in Hyperinflationary Economies ("MFRS 129"), as detailed in Section A1(b)(ii) and Section A4.

Refer to Section B1 for performance review of the Group's major operating segments.

1. Q1 2023 revenues were higher as compared to Q1 2022 due to the strong recovery from core non-COVID-19 revenues as both local and foreign patients returned to seek treatment at the Group's hospitals. The commencement of operations at Atasehir Hospital in September 2022, the continuous ramp-up of operations at GHK Hospital, as well as the acquisitions of Ortopedia Ozel Saglık Hizmetleri Anonim Sirketi ("Ortopedia") on 9 August 2022 and Ozel Kent Saglik Hizmetleri ve Malzemeleri Sanayi Ticaret A.S. ("Kent") on 14 February 2023 also contributed to the increase.
2. Q1 2023 other operating income included the gain on disposal of Gleneagles Chengdu Hospital and IMU Health of RM119.3 million and RM862.1 million respectively.
3. Q1 2023 staff costs increased as the Group expands its capacity to cater for higher demand for its services and annual increments. In addition, the consolidation of staff costs of Ortopedia's and Kent's staff costs upon acquisition also contributed to the increase.
4. Q1 2023 depreciation and impairment expense was higher as compared to Q1 2022 due to the application of MFRS 129 for the Group's subsidiaries in Turkiye, where the carrying amounts of property, plant and equipment were higher after reindexation.
5. Q1 2023 other operating expenses increased mainly attributed to the higher level of activities and higher cost of operations such as increased utilities costs, increased spend on repairs and maintenance as well as IT-related expenses. In addition, the Group incurred professional fees in relation to its acquisition and disposal of subsidiaries.
   In February 2023, Turkiye was struck by a massive earthquake and the Group mobilized on-the-ground medical treatment and emergency support through Acibadem Holdings' operations in Turkiye. It also donated about RM10.0 million in-cash and in-kind to support humanitarian efforts for the earthquake victims.
6. Acibadem Holdings recognised exchange differences arising from the translation of its non-TL denominated borrowings/payables net of its non-TL denominated cash/receivables as finance income or finance cost respectively. Acibadem Holdings manages its foreign exchange exposures by entering into cross currency swaps ("CCS"). The Group recognised a net gain of RM7.1 million in Q1 2023 as compared to a net loss of RM10.9 million in Q1 2022.
   Excluding the above, net finance costs were higher in Q1 2023 mainly due to interest expense on loans drawn down for redemption of perpetual securities in July 2022 and higher prevailing interest rates in Q1 2023.
7. Refer to Section B5 for details on income tax expenses.
8. Parkway Life Real Estate Investment Trust ("PLife REIT") hedges its interest in the net assets of its Japanese operations. The effective portion of the hedge was recognised as a hedge of net investments in the statement of other comprehensive income, which offsets the foreign currency translation differences from the translation of the net assets of its Japanese operations. The Group's remaining foreign currency translation differences from foreign operations arise mainly from the translation of the net assets of its Singapore, India and Europe operations.

Note:

Key exchange rates used to translate the YTD results of overseas subsidiaries into RM:

		31 Mar 2023	31 Mar 2022
1	SGD	3.2906	3.0991
1	TL	0.2323	0.3010

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IHH HEALTHCARE BERHAD

Registration No. 201001018208

(Incorporated in Malaysia)

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2023

		31 Mar 2023	31 Dec 2022
	Note	RM'000	RM'000
Assets
Property, plant and equipment		12,274,349	11,882,760
Right-of-use assets		6,837,088	6,685,030
Investment properties		4,071,769	3,938,335
Goodwill on consolidation	1	13,924,332	13,209,372
Other intangible assets		2,849,273	2,737,840
Interests in associates		130,373	133,076
Interests in joint ventures		6,761	6,751
Other financial assets		140,423	127,620
Trade and other receivables	2	172,698	196,563
Tax recoverables		385,731	374,905
Derivative assets		199,668	258,970
Deferred tax assets		599,260	633,943
Total non-current assets		41,591,725	40,185,165
Development properties		76,185	76,471
Inventories		589,176	519,431
Trade and other receivables	2	2,957,447	2,625,424
Tax recoverables		82,279	73,641
Other financial assets	3	148,068	249,717
Derivative assets		196,791	149,816
Cash and cash equivalents		4,922,979	3,663,511
		8,972,925	7,358,011
Assets classified as held for sale	4	192	924,311
Total current assets		8,973,117	8,282,322
Total assets		50,564,842	48,467,487

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