IHH Annual Report 2018

Forging Ahead in India with Fortis Healthcare In November 2018, we reached a significant milestone by making further inroads into the Indian market. IHH is well aware of the near term challenges that come with this acquisition, and we would like to share with our stakeholders our plans to turn around Fortis. Q: WHAT ARE THE SHORT-TERM STRATEGIES IN HANDLING FORTIS’ EXISTING CHALLENGES? A: There are several legacy issues within Fortis. These include financial and governance issues that are currently under investigation. One of our immediate approaches is to ensure adequate funding for the buyback of all assets of Religare Health Trust (“RHT”), a Singapore associate of Fortis, which will provide an immediate boost to Fortis EBITDA margins. The buy-back of the Indian assets from RHT was successfully completed on 15 January 2019. IHH has also initiated a disciplined turnaround plan. This includes improving operational efficiencies and operating leverage, renegotiating some of Fortis’ credit lines as well as procurement costs to leverage IHH’s global procurement pricing arrangement with some of its vendors. Q: HOW DOES IHH PLAN TO UNLOCK FORTIS’ POTENTIAL FOR THE LONG TERM? A: We are aware that the fundamentals at Fortis require strengthening. It is only with a strong foundation that we can look forward to restore its performance. We have done our due diligence and are cautiously optimistic in turning things around. First and foremost, we have reconstituted the Board with a total of eight members, three current independent directors and five additional non-executive directors nominated by IHH, to ensure the highest standards of governance. For the mid to longer term, we will look to harness the advantages of SRL, a Fortis subsidiary that focuses on diagnostic testing. SRL plays a strategic role for Fortis and is an intergral part of our strategic vision. We believe India remains a largely under-served market and there is tremendous scope to develop SRL into a lab powerhouse in India. Our focus and continued investments in technology and innovation will also enable IHH to capitalise on the opportunities in the healthcare industry. There is however, always a certain element of risk in any business. The expanded scale of operations in more countries means that the group is increasingly subject to foreign exchange risks, as is the case of Turkey. As we operate in an increasingly competitive and fragmented healthcare landscape, we also foresee rising competition from various sources, such as from the public healthcare system and from disruptive digital healthcare start-ups. We also face increased competition for trained healthcare personnel in the markets we operate. As such, we are continually looking to increase and deepen our talent bench by attracting, retaining and developing quality healthcare personnel to support our growth strategy. Looking ahead, the Group will execute a multi-country portfolio approach to diversity its earnings base and enhance its differentiated offering via organic and inorganic growth. The Group is consolidating its market leading position through improving clinical outcomes, enhancing our service offerings, adding capacity to existing facilities and leveraging technology to increase operational efficiencies. Given the strong demand for private healthcare, our pipeline of expansion and new hospital openings is backed by our positive cash flows in our home markets. The strategy is to provide a good balance of cashflow generative markets, such as that of Singapore and Malaysia, medium-term growth momentum from Turkey and long-term growth opportunities from India and Greater China. We are confident that our resilience will take us much further ahead, and we will be able to weather the challenging economic climate. We will continue to create value for all stakeholders by growing sustainably and prudently. Thank you. Dr Tan See Leng Managing Director and Chief Executive Officer 25 Strategic Report