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08 April 2013

MD Medical Group Reports 66% Net Profit Growth in 2012

8 April 2013, Moscow, Russia – MD Medical Group Investments Plc (“MD Medical Group”, “MDMG” or the “Company” – LSE: MDMG), Russia’s leading provider of private women’s and children’s health care, announces its audited consolidated financial statements for the full year ended 31 December 2012 under International Financial Reporting Standards (IFRS).

2012 Financial Highlights (in RUB mln)

2012

2011

Change, %

Revenue

4,061

2,908

40%

Cost of sales

(2,013)

(1,464)

38%

Gross profit

2,048

1,444

42%

Administrative expenses

(484)

(246)

97%

Operating profit

1,560

1,193

31%

EBITDA[1]

1,694

1,292

31%

EBITDA margin

42%

44%

-2 p.p.

Net profit for the period

1,538

924

66%

Net profit margin

38%

32%

6 p.p.

Earnings per share (RUB)[2]

21.46

13.76

56%

Dividend per share, proposed by BoD (USD)

0.13

-

-

2012 Business Highlights

  • Completed a successful IPO of Global Depositary Receipts on the London Stock Exchange, raising $150 million to fund future growth
  • Completed construction of a new, purpose built hospital in the Lapino suburb of Moscow which opened on budget and on schedule
  • Completed the integration of the Mother and Child clinic chain into the Group improving internal referrals and client flow across facilities and services
  • Opened a Mother & Child outpatient clinic in the new regional market of Perm, 1,500 km east of Moscow
  • Added new treatments and technologies at the Perinatal Medical Centre Hospital to include assisted reproduction technology, foetal surgery, endovascular surgery and MRI scanning
  • Continued improvement of operational efficiency at existing and newly-opened clinics through the application of Group standards and best practice
  • Appointed Simon Rowlands as independent Non-Executive Member of the Board of Directors
  • Appointed Kirill Dmitriev to the Board as a Non-Executive Director

Commenting on the 2012 financial results, Chairman of MD Medical Group, Dr Mark Kurtser said:

2012 was a defining year for MD Medical Group and a year in which we delivered an excellent operational and financial performance with revenue and EBITDA growth of 40% and of 31% respectively. These achievements were due in large part to the expansion of our presence in Moscow and the regions, the successful integration of the Mother & Child chain of outpatient clinics and the introduction of new services across our network.

In 2012 we also opened the doors of our second hospital to patients on budget and on schedule, following a USD 150 million investment. We have maintained this momentum with a strong pipeline of new projects, such as the hospital at Ufa where construction has recently commenced.

These important developments formed the backdrop for the next stage in our journey to become an internationally-recognised market leader which culminated in our successful IPO of Global Depositary Receipts on the London Stock Exchange in October. We are extremely grateful to our new shareholders for their participation and on behalf of the Board I would like to thank them for their support.

For 2012, total revenue increased by 40%, from RUB 2,908 million to RUB 4,061 million. The revenue growth was primarily driven by:

  • Record high number of deliveries in 2012 on the back of growth rate outpacing that in Moscow
  • Solid growth of the Group’s IVF segment: a 50% increase in number of IVF cycles
  • Continuing increase of outpatient visits as a result of expansion of the range of services provided by the Group and integration of new clinics
  • Increase of average checks in line with the Group’s price indexation policy
The dominant share of total revenue was derived from obstetrics and gynecology services and deliveries. The fastest growing revenue segments were IVF, due to integration of a number of clinics and other medical services, mostly driven by opening a clinical diagnostics center at PMC hospital in Moscow.
 

Revenue, RUB mln

2012

2011

Change, %

OBGYN excl. deliveries

1,208

816

48%

Deliveries

1,057

874

21%

IVF

542

341

59%

Pediatrics

693

483

44%

Other medical services

387

248

56%

Sales of goods and other revenue

175

146

20%

Total Revenue

4,061

2,908

40%

 
Cost of sales increased by 38% to RUB 2,013 million against RUB 1,464 million in 2011. Payroll including related social taxes as well as materials and supplies used accounted for the majority of the Group’s cost of sales. A 36% growth in payroll was primarily driven by an 11% increase in the number of the Group’s personnel and due to growth of variable wages as a result of revenue growth.
 

Cost of sales, RUB mln

2012

2011

Change, %

Payroll and related social taxes

1,268

932

36%

Materials and supplies used

426

319

33%

Depreciation

131

98

34%

Property tax

54

35

56%

Energy and utilities

43

32

35%

Medical services

44

30

47%

Repair and maintenance

21

12

72%

Other expenses

26

7

267%

Total cost of sales

2,013

1,464

38%

Administrative expenses amounted to RUB 484 million in 2012 – a 97% increase year-on-year. A significant part of this growth (RUB 180 million) came from an increase in payroll (including related social taxes), as well as in utilities and materials.

In the reporting period, EBITDA grew by 31% to RUB 1,694 million, compared with RUB 1,292 million for the full year of 2011.

Net profit rose by 66% to RUB 1,538 million compared with RUB 924 million in 2011.

The Board of Directors has recommended a dividend for 2012 of USD 0.13 per share, representing 21% of net profit attributable to owners of the Company. The Board of Directors meeting, scheduled to be held on 23 April 2013, will set the record date and payment date for the aforementioned dividend together with the date for the Company’s Annual General Meeting.

Key indicators of MD Medical Group’s financial position as of 31 December 2012

As of 31 December 2012, total assets increased by RUB 8,144 million to RUB 12,914 million, a 171% increase year-on-year. The growth is associated with the following factors:

  • an increase of cash and equivalents and short term investments in the amount of RUB 4,879 million as a result of the IPO
  • increased property, plant and equipment in the amount of RUB 3,379 million mostly due to the launch of Lapino hospital

As at the end of the reporting period, the Company's total liabilities rose by RUB 2,328 million or 119% since 31 December 2011, to RUB 4,290 million. The growth in the liabilities is primarily caused by an increase in long term bank loans and trade payables related to the construction of Lapino hospital.

MD Medical Group’s total CAPEX rose by RUB 834 million or by 46% year-on-year and amounted to RUB 2,646 million in 2012, of which RUB 2,389 million was spent on the construction of Lapino hospital.

Subsequent events

  • Commenced construction of a third hospital in Ufa, the capital of Bashkortostan
  • Announced the acquisition of IDK Medical Company clinic network, expanding the Group’s geographic footprint into the Samara region

Consolidated financial statements are available on the Company’s web site: www.mcclinics.com/reports/financialreports/

Conference call:

The release of the full year financial results will be accompanied by an analyst and investor conference call hosted by:

- Mark Kurtser, Chairman of the Board of Directors
- Elena Mladova, Chief Executive Officer
- Vitaly Ustimenko, Chief Financial Officer
- Alexander Rayt, Head of IFRS Department
- Maxim Novikov, Head of Investor Relations

Date: Monday, 8 April 2013
Time: 15.00 UK / 10.00 US (East coast) / 18.00 Moscow

Conference-call details: Access Code: 4611941

- Russia Local: +7-495-580-9543
- UK Local: +44-207-153-2027
- UK Toll Free: 0800-358-0886
- US Access Number: 1-480-629-9726
- US Toll-Free Number: 1-877-941-2930

The call will be held in English and will start with a 10-15 minute presentation followed by Q&A.

The replay of the call will be available until April 22nd, 2013.

Replay Numbers: Access Code: 4611941

- UK + 44 20 7959 6720
- US +1 303 590 3030

* * *

Forward-Looking Statements:

This press release contains forward looking statements, which are based on the Company’s current expectations and assumptions and may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The forward looking statements contained in this press release are based on past trends or activities and should not be taken that such trends or activities will continue in the future. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of variables which could cause actual results or trends to differ materially, including, but not limited to: conditions in the market, market position of the Company, earnings, financial position, cash flows, return on capital and operating margins, anticipated investments and economic conditions; the Company’s ability to obtain capital/additional finance; a reduction in demand by customers; an increase in competition; an unexpected decline in revenue or profitability; legislative, fiscal and regulatory developments, including, but not limited to, changes in environmental and health and safety regulations; exchange rate fluctuations; retention of senior management; the maintenance of labour relations; fluctuations in the cost of input costs; and operating and financial restrictions as a result of financing arrangements.

No statement in this press release is intended to constitute a profit forecast, nor should any statements be interpreted to mean that earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for the Company. Each forward looking statement relates only as of the date of the particular statement.


[1] - EBITDA calculated as operating profit before depreciation and amortization.
[2] - Basic and fully diluted earnings per share calculated as profit for the year attributable to owners of the company divided by weighted average number of ordinary shares in issue during the year.

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