MD Medical Group Posts 28% Revenue Growth, 37% EBITDA Growth in 2016

MD Medical Group Investments Plc (“MD Medical Group”, “MDMG” or the “Company” – LSE: MDMG), a leading Russian private healthcare provider, announces its audited consolidated financial statements for the full year ended 31 December 2016 under International Financial Reporting Standards (“IFRS”).

The web cast of the conference call:

FY 2016 Key Highlights

• Revenue increased 28% year-on-year (y-o-y) to RUB 12,179 mln vs. RUB 9,507 mln in FY 2015, driven mainly by the continued ramp-up at Lapino, improved results at existing clinics, and the new hospital in Ufa, and the results of new Siberian clinics consolidated since Q1 2016.
• EBITDA grew 37% y-o-y to RUB 3,670 mln. Like-for-like EBITDA grew 32% y-o-y. The EBITDA margin was 30%, up 2 p.p. y-o-y.
• Net profit grew 29% y-o-y to RUB 2,277mln.
• Operating cash flow increased 37% y-o-y to RUB 3,861 mln.
• CAPEX amounted to 2,222 mln, including M&A costs of RUB 475 mln. Key investments included the construction of a new wing at the Novosibirsk hospital (RUB 739 mln) and maintenance of existing assets (RUB 465 mln).
• Debt increased 6% vs. 30 June 2016 to RUB 3,283 mln, while net debt decreased 10% from 30 June 2016 to RUB 1,648 mln as cash and equivalents increased by 29% vs. 30 June 2016 to RUB 1,643 mln. The net debt to EBITDA ratio decreased to 0.4x.
• Working capital remained negative at RUB (1,376) mln and represented 11% of revenue.

FY 2016 Business Highlights

• Continued ramp-up at Lapino. Capacity utilisation rates were 82% at the deliveries department, 81% at the IVF department, 61% at the in-patient department, and 43% at the out-patient department^[1].
• Flow of patients to Mother and Child Ufa hospital continued to grow during 2016. Average capacity utilisation was 35%^[2] at the deliveries department, 75% at the IVF department, 41% at the in-patient department and 42% at the out-patient department.
• Ground-breaking ceremony for a new hospital in Samara. The Mother and Child Samara hospital will have a planned area of 15,000 sqm and 164 beds. The hospital will have annual capacity for up to 3,000 deliveries, 1,200 IVF cycles, 29,500 patient-days, and 397,000 out-patient visits.
• Opening of a new clinic in Moscow, Mother and Child Khodynskoe Pole, in June 2016. The clinic offers a wide range of women’s healthcare services, such as IVF, consultations with geneticists and OBGYNs, as well as services in foetal medicine including foetal diagnostics and treatment. It has capacity for up to 1,000 IVF cycles and 39,600 consultations with doctors each year.
• Opening of a new clinic in Kostroma in April 2016, the first in the region to offer IVF. The new clinic also provides OBGYN consultations, pregnancy examinations, expert ultrasound examinations, and ante-natal diagnostics. The new clinic will be able to cater for up to 10,000 physician visits per year.
• Opening of a new IVF department at Mother and Child Yugo-Zapad clinic in Moscow in March 2016, which can carry out 800 IFV cycles a year. The expanded Mother and Child Yugo-Zapad clinic will offer new services including hysteroscopy and fertiloscopy, as well as chorion biopsy and amniocentesis for genetic research.
• Opening of the interventional cardiology and cardiovascular surgery department at Lapino hospital. It offers emergency and routine care, and carries out high-tech endovascular diagnostics, and operative treatments.
• Opening of the new out-patient medical centre in Odintsovo with a total area of 140 sq m that offers OBGYN, ultrasound screening, urology, otolaryngology, neurology and surgery. The medical centre effectively serves as a branch of Lapino hospital and is located only 10 km from the hospital – the Group’s largest medical facility. The medical centre is able to carry out up to 30,000 specialist treatments per year.

Commenting on the FY 2016 financial results, Mark Kurtser, CEO of MD Medical Group, said:

Revenue

Revenue grew by 28% y-o-y to RUB 12,179 mln thanks to higher patient numbers at Lapino, PMC and Ufa, as well as the Group’s existing clinics. The Siberian clinics acquired in December 2015 and January 2016 also made a significant contribution to the Group’s results.

In FY2016, the share of regional clinics and hospitals in overall revenue continued to grow y-o-y and amounted to 34%, mainly thanks to increased revenue from the Ufa hospital and the acquisition of the Siberian clinics.

Key areas of focus – OBGYN, deliveries, IVF and paediatrics – represent 75% of the Group’s revenue. IVF was the fastest-growing service line in 2016 (up 63% y-o-y). The largest contribution to IVF growth was made by the newly acquired clinics in Siberia, as well as Lapino, PMC and Moscow clinics.

Revenue structure in FY 2016 (RUB mln)

Operating expenses, excl. D&A

Cost of sales, including general and administrative expenses and excluding D&A, amounted to RUB 8,521 mln in FY 2016 (up 25% y-o-y).

LFL expenses increased by 16% to RUB 7,922 mln, while LFL revenue grew 20%.

The increase in expenses in 2016 was mainly due to the higher number of patient visits and cost inflation.

CAPEX and Balance Sheet

Total CAPEX including M&A amounted to RUB 2,222 mln (vs. RUB 1,069 mln in 2015), RUB 475 mln of which was spent on M&A. Other major investments included the construction of a new wing at Mother and Child Novosibirsk (RUB 739 mln) and maintenance of existing assets (RUB 465 mln).

As of 31 Dec 2016, the Group’s debt increased by 6% as compared to 30 June 2016, while cash and equivalents increased by 29%, or RUB 368 mln. Net debt amounted to RUB 1,648 mln, down 10% compared to 30 June 2016.

The net debt to EBITDA ratio went down to 0.4x.

The Company has historically maintained negative working capital as a source of additional financing. Working capital increased 4% y-o-y to RUB (1,376) mln and amounted to 11% of revenue.

Events occurring after the reporting period

The Board of Directors recommended a final dividend for the year of RUB 338 mln, or RUB 4.5 per share, representing 15% of net profit attributable to the owners of the Company.

Approval of dividends will be discussed at the Annual General Meeting of shareholders (AGM) scheduled for 21 April 2017. The record date for participation in the AGM is 15 March 2017. The deadline for GDR holders to vote is 19 April 2017.

Subject to shareholders' approval of the dividend at the AGM, the dividend record date is set as 28 April 2017. The Group's Global Depositary Receipts will be marked as ex-dividend on 27 April 2017. The pay date for GDR holders is set for 23 May 2016 in US dollars based on the Central Bank of Russia rate as of 17 March 2017. Information regarding dividend taxation according to the Russian Tax Code is listed in Appendix 1.

Under the Russian Tax Code, dividends paid by Russian companies are subject to the following tax rates:

1) 15% as a general rule;

2) A reduced rate may be applied in the case of Russian tax residents and residents of foreign jurisdictions whose Governments have signed a double taxation treaty (“DTT”) with the Government of Russia. Countries that have signed a DTT with Russia are listed in Appendix 2. Terms for applying a reduced tax rate for certain countries are set out in Appendix 3.

Detailed information regarding dividend taxation and applicable reduction according to the Russian Tax Code is listed in Appendix 1.

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Conference call:

The Company will host a conference call and webcast for investors and analysts on 20 March 2017 at 5.00 pm Moscow time (2.00 pm London; 10.00 am New York).

The call will be hosted by:

• Dr Mark Kurtser, CEO and a member of the Board of Directors
• Andrey Khoperskiy, Deputy CEO for Finance and Economics
• Elena Romanova, Head of Investor Relations

The dial-in and online viewing details are below:

Conference-call details:

• Russia, Moscow Toll-Free: 8 800 100 9635
• UK: 020 3059 8125
• US Toll-Free: 1 7249 289 460
• All other locations: + 44 20 3059 8125

Access Code: 73501615

This announcement contains inside information.

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