IHH Annual Report 2019

HOME MARKET – INDIA What we do Primary Care Secondary & Tertiary Care Quaternary Care Complementary Ancillary Services With 33 hospitals, India is IHH’s fourth home market. The Group has a 62.23%-stake in Continental Hospitals and a 73.87%- share in Gleneagles Global Hospitals. On 13 November 2018, IHH became the single largest controlling shareholder in Fortis after completing an INR40 billion (approximately RM2.4 billion) subscription to a preferential allotment of shares for a 31.17%-stake in Fortis Healthcare Limited (Fortis). This is a leading integrated healthcare services provider in India with operations incorporating both hospitals and diagnostics businesses. Currently, Fortis is the second largest player in India, in terms of number of hospitals, and operates a network of 26 healthcare facilities with over 4,000 operational beds and approximately 9,000 potential beds capacity. Fortis, through its subsidiary SRL Limited, operates over 415 diagnostic centres across India and is one of the largest diagnostic players in the country. In addition, IHH has a 50-50 joint venture with Apollo Hospitals Enterprise Ltd (Apollo) to operate Apollo Gleneagles Hospitals in Kolkata. Performance Highlights Revenue for the Group’s India hospitals increased to RM3.3 billion in FY2019 from RM851.3 million the previous year and EBITDA grew to RM360.0 million from RM6.3 million, with the consolidation of Fortis, acquired in November 2018. Our India hospitals inpatient admissions tripled to 363,126 with the inclusion of Fortis’ inpatient admissions for the full year in FY2019. This contrasts with the inclusion of only one month in FY2018 when Parkway Pantai acquired Fortis in November 2018. However, Parkway Pantai’s India hospitals revenue per inpatient admission contracted 13.5% to RM6,376 as Fortis’s revenue intensity is generally lower than Parkway Pantai’s other existing operations in India. Since the transformational acquisition of Fortis in November 2018, Fortis completed the acquisition and consolidated various Indian subsidiaries of RHT Health Trust for INR36.0 billion (approximately RM2.1 billion) as planned in January 2019. This consolidates Fortis’s control over the RHT assets for a more focused and streamlined business operation and will generate substantial cost savings as Fortis will no longer need to bear significant service fees paid to the trust. Fortis has since turned around and progressively improved, recording four consecutive quarters of positive profit before tax and improved EBITDA margins to 14% in the quarter ending December 2019, compared with 5% in the corresponding quarter in 2018. It has ongoing cost optimisation plans and continues to focus on various initiatives across the network in order to ensure that Fortis runs as a leaner organisation. The Fortis balance sheet remains robust, with low gearing and a more efficient working capital cycle. SRL Diagnostics, an arm of Fortis, has seen relatively stable growth while maintaining its margins. Fortis’s impetus going forward will be to look objectively at the portfolio of assets and expansion strategy to allocate resources for better returns. At the same time it will be further strengthening the critical building blocks of the business in terms of doctor engagement, clinical specialties, quaternary care medical treatments and technology-led initiatives in order to enhance growth and performance. Outlook India is a market with tremendous potential and the Group believes that the potential for growth continues to be supported by expanding demographics, an increase in the incidence of lifestyle-related diseases and rising affluence. At the same time, the low cost of treatment, advanced facilities and availability of highly skilled doctors make India a popular location for medical tourism. It is estimated that India’s medical tourism industry could be worth INR63 billion (RM39 billion) and account for 20% of the global market share by 2020. IHH is anticipating substantial growth opportunities with the burgeoning healthcare demand in India. In view of the lock down imposed by the government in response to the COVID-19 outbreak and the ongoing travel restrictions, we expect significant impact to patient volumes on our India operations. During this period, we will remain focus in adopting strict measures to control costs. In the medium to long term, we remain focused on improving operations and will look to introduce new service lines to ramp-up on volumes and improve our case mix. Key Facts RM3.3 billion Revenue RM360.0million EBITDA 57