瑞慈医疗(01526) - 2024 - 中期财报

Management Discussion and Analysis This section provides an overview of the Group's business operations, financial performance, and future strategies for the reporting period Business Overview and Strategic Outlook The Group operates two main segments: general hospitals and physical examination centers, with hospital services showing growth and the physical examination business focusing on high-quality development and product iteration Industry Overview The healthcare service industry in 2024 benefits from supportive policies, technological advancements like AI, and increasing demand driven by health awareness and an aging population - From January to November 2023, the total number of outpatient and inpatient visits at national medical and health institutions increased by 9.4% year-on-year, with private hospitals growing by 9.3%, indicating a recovery in medical demand[19] - China's physical examination industry market size grew from RMB 151.1 billion in 2018 to RMB 217 billion in 2022, with a compound annual growth rate of approximately 9.46%, demonstrating a steady growth trend[20] General Hospital Business Nantong Ruici Hospital, a Grade 3 Class B general hospital, achieved year-on-year growth in inpatient services and surgeries, with an increased proportion of Grade IV surgeries, and expanded its rehabilitation center and collaborations Nantong Ruici Hospital Operating Data (For the six months ended June 30, 2024) | Metric | 2024 Period | 2023 Period | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Outpatient visits | 161,604 | 174,756 | -7.53% | | Inpatient visits | 15,760 | 14,977 | +5.23% | | Number of surgeries among discharged patients | 2,429 | - | +4.38% | | Proportion of Grade IV surgeries | 20.26% | - | increased by 3.41 percentage points | - Nantong Ruici Meidi Nursing Home had 89 elderly residents as of June 30, 2024, with an occupancy rate of 84.0%, a decrease from 100% in the same period last year[22] Physical Examination Business The physical examination business, a key revenue driver, operates under dual brands with 82 centers nationwide, focusing on enhancing customer experience, medical quality, and operational efficiency through digital initiatives - As of June 30, 2024, the Group operates 82 physical examination centers nationwide, with 72 already operational, covering 29 cities[23] - During the reporting period, the Group established a "Service Promotion and Improvement Task Force," identifying 111 service improvement targets based on customer feedback, achieving an improvement effectiveness rate of 93%[23] Outlook Nantong Ruici Hospital aims to become a Grade 3 Class A general hospital, focusing on six major discipline clusters, while the physical examination business will pursue high-quality development, product upgrades, and talent development to build a "medical-grade physical examination" brand - Nantong Ruici Hospital aims to become a Grade 3 Class A general hospital, one of Nantong City's three major medical centers, and implement a "Three-Year Plan for High-Quality Development of Key Specialties"[24] - The physical examination business will focus on product iteration and upgrades, developing post-examination medical services and derivative products to build a "medical-grade physical examination" brand image[24] Financial Review The Group's total revenue decreased by 4.1% to RMB 1.231 billion, primarily due to a high base in the physical examination business last year, leading to a decline in gross profit margin to 32.2% and a decrease in net profit Revenue Total Group revenue decreased by 4.1% to RMB 1.231 billion, with general hospital revenue increasing by 3.7% to RMB 324 million, while physical examination revenue declined by 6.1% to RMB 923 million due to a higher comparative base in the prior year Segment Revenue (For the six months ended June 30) | Business Segment | 2024 (RMB '000) | 2023 (RMB '000) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | General Hospital Business | 323,966 | 312,416 | +3.7% | | Physical Examination Business | 922,936 | 982,535 | -6.1% | | Total | 1,231,205 | 1,284,340 | -4.1% | Cost of Sales and Gross Profit Cost of sales increased by 4.3% to RMB 835 million due to more physical examination centers, while gross profit decreased to RMB 396 million, with the gross profit margin falling 5.5 percentage points to 32.2% due to lower revenue and higher costs - Cost of sales increased by 4.3% year-on-year, primarily due to an increase in the number of physical examination centers compared to the same period, leading to higher overall costs[27][28] - Gross profit margin decreased from 37.7% to 32.2%, mainly due to a decline in physical examination business revenue while its fixed costs remained relatively stable[29] Operating Expenses and Other Gains/Losses Distribution and selling expenses decreased to RMB 109 million due to lower sales commissions, while administrative expenses slightly increased to RMB 112 million, and net finance costs rose to RMB 61 million primarily due to exchange losses - Distribution and selling expenses were RMB 108.6 million, a significant decrease from RMB 163.2 million in the same period last year, mainly due to reduced sales commissions and promotional expenses resulting from lower physical examination business revenue[30] - Net finance costs increased from RMB 49 million to RMB 61 million, primarily due to exchange losses incurred during the reporting period, compared to exchange gains in the same period last year[34] Profit for the Period and Adjusted EBITDA Net profit for the period declined to RMB 87.1 million from RMB 126 million, while adjusted EBITDA decreased by 5.2% to RMB 409 million, with the adjusted EBITDA margin remaining largely stable at 33.2% Adjusted EBITDA Calculation (For the six months ended June 30) | Metric | 2024 (RMB '000) | 2023 (RMB '000) | | :--- | :--- | :--- | | Profit for the period | 87,121 | 126,219 | | Add: Income tax expense | 38,027 | 53,718 | | Add: Finance costs — net | 60,966 | 49,039 | | Add: Depreciation and amortization | 216,506 | 192,616 | | Add: Pre-opening expenses and trial operation EBITDA loss | 6,164 | 14,901 | | Less: Reversal of share options | — | (5,351) | | Adjusted EBITDA | 408,784 | 431,142 | | Adjusted EBITDA Margin | 33.2% | 33.6% | Financial Position and Liquidity As of June 30, 2024, the Group's total assets were RMB 4.54 billion, with cash and cash equivalents at RMB 587 million and total borrowings at RMB 814 million, resulting in a net current liability of RMB 708 million and an increased gearing ratio, though management remains confident in continued operations Key Financial Position Indicators (As of June 30, 2024) | Metric | June 30, 2024 (RMB million) | December 31, 2023 (RMB million) | | :--- | :--- | :--- | | Cash and cash equivalents | 587.1 | 811.2 | | Total borrowings | 813.5 | 866.6 | | Net current liabilities | 708.2 | 726.6 | | Gearing ratio | 59.3% | 56.7% | - Capital expenditure during the reporting period was RMB 322 million, an increase year-on-year, primarily for the renovation of Nantong Ruici Hospital and the purchase of equipment and decoration for physical examination centers[47] - The Group's interest rate risk primarily stems from bank borrowings, with RMB 342 million being floating-rate loans; management closely monitors foreign exchange risk but currently has no hedging policy[51][52] Human Resources As of June 30, 2024, the Group's employee count increased to 9,654, with compensation policies based on performance, seniority, and market conditions, complemented by regular training programs to enhance staff skills - As of June 30, 2024, the Group's total number of employees was 9,654, an increase of 241 from the end of 2023[57] Supplementary Information This section provides additional details on interim dividends, corporate governance practices, interests of directors and major shareholders in securities, and share option schemes Interim Dividend The Board resolved to declare an interim dividend of HKD 0.045 per share for the reporting period, totaling approximately HKD 71.6 million, expected to be paid around September 23, 2024 - An interim dividend of HKD 0.045 per share was declared, with the record date set for September 16, 2024[59] Corporate Governance Practices The company generally complied with the Corporate Governance Code, with two deviations: no legal action insurance for directors and the Chairman and CEO roles held by the same individual, Dr. Fang Yixin, which the Board believes benefits strategic implementation and maintains power balance - The company deviated from Corporate Governance Code Provision C.2.1, as the roles of Chairman and Chief Executive Officer are not separated and are both held by Dr. Fang Yixin[61] Interests of Directors, Chief Executive, and Substantial Shareholders in Securities As of June 30, 2024, controlling shareholders Dr. Mei and Dr. Fang, through controlled corporations and spouse interests, jointly held approximately 60.28% of the company's shares, in addition to share options representing about 2.00% of relevant shares Shareholdings of Directors and Substantial Shareholders (As of June 30, 2024) | Shareholder Name | Capacity | Number of Ordinary Shares | Approximate Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Dr. Mei | Interests in controlled corporation | 958,636,800 (L) | 60.28% | | Dr. Fang | Spouse's interests | 958,636,800 (L) | 60.28% | | Cuici | Beneficial owner | 958,636,800 (L) | 60.28% | Share Option Schemes The company has a Pre-IPO Share Option Scheme and a Share Option Scheme, with 47,710,500 unexercised options at HKD 1.60 and 46,200,000 unexercised options at HKD 2.42 respectively as of the reporting period, with no options exercised, cancelled, or lapsed - Pre-IPO Share Option Scheme: As of June 30, 2024, there were 47,710,500 unexercised share options with an exercise price of HKD 1.60 per share[75] - Share Option Scheme: As of June 30, 2024, there were 46,200,000 unexercised share options with an exercise price of HKD 2.42 per share[79] Interim Financial Information Review Report This section presents the auditor's review report on the Group's interim financial information, confirming its preparation in accordance with Hong Kong Accounting Standard 34 Auditor's Review Report The company's auditor, BDO Limited, conducted a review of the interim financial information in accordance with Hong Kong Standard on Review Engagements 2410, concluding that nothing came to their attention suggesting the information was not prepared in all material respects in accordance with HKAS 34 - The auditor issued an unmodified review conclusion, stating that the interim financial information was prepared in all material respects in accordance with Hong Kong Accounting Standard 34[82] Interim Condensed Consolidated Financial Statements This section provides the interim condensed consolidated financial statements, including the statement of financial position, profit or loss, cash flows, and a summary of notes, offering a comprehensive view of the Group's financial performance and position Interim Condensed Consolidated Statement of Financial Position As of June 30, 2024, total assets were RMB 4.543 billion, total liabilities RMB 3.356 billion, and total equity RMB 1.187 billion, with non-current assets primarily comprising property and equipment and right-of-use assets, and a net current liability of RMB 708 million Statement of Financial Position Summary (As of June 30, 2024) | Item | Amount (RMB '000) | | :--- | :--- | | Total Assets | 4,542,815 | | Non-current assets | 3,327,375 | | Current assets | 1,215,440 | | Total Liabilities | 3,356,183 | | Non-current liabilities | 1,432,552 | | Current liabilities | 1,923,631 | | Total Equity | 1,186,632 | Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, the Group reported revenue of RMB 1.231 billion, gross profit of RMB 396 million, operating profit of RMB 186 million, and profit for the period of RMB 87.12 million, with basic and diluted earnings per share at RMB 0.05 Statement of Profit or Loss Summary (For the six months ended June 30, 2024) | Item | Amount (RMB '000) | | :--- | :--- | | Revenue | 1,231,205 | | Gross profit | 396,287 | | Operating profit | 185,697 | | Profit before income tax | 125,148 | | Profit for the period | 87,121 | | Profit attributable to owners of the Company | 84,991 | | Basic earnings per share | RMB 0.05 | Interim Condensed Consolidated Statement of Cash Flows Net cash generated from operating activities significantly decreased to RMB 73.79 million, with net cash used in investing activities at RMB 109 million and financing activities at RMB 188 million, resulting in a net decrease of RMB 224 million in cash and cash equivalents, ending the period at RMB 587 million Statement of Cash Flows Summary (For the six months ended June 30, 2024) | Item | Amount (RMB '000) | | :--- | :--- | | Net cash generated from operating activities | 73,794 | | Net cash used in investing activities | (109,021) | | Net cash used in financing activities | (188,343) | | Net decrease in cash and cash equivalents | (223,570) | | Cash and cash equivalents at beginning of period | 811,210 | | Cash and cash equivalents at end of period | 587,118 | Summary of Notes to the Financial Statements The notes detail accounting policies, segment information, key asset and liability items, and related party transactions, highlighting the Group's two business segments, a net current liability of RMB 708 million, and ongoing confidence in the going concern basis, with controlling shareholders providing guarantees for some borrowings - As of June 30, 2024, the Group's current liabilities exceeded current assets by RMB 708 million; however, the directors believe that, considering operating cash flows, unutilized bank facilities, and renewable bank facilities, the going concern basis for financial statement preparation remains appropriate[94] Segment Profit (For the six months ended June 30, 2024) | Business Segment | Segment Profit (RMB '000) | | :--- | :--- | | General Hospital | 72,356 | | Physical Examination Center | 215,616 | | Unallocated | (299) | | Total | 287,673 | - Controlling shareholders Dr. Fang and Dr. Mei provided personal guarantees for the Group's RMB 58.5 million borrowings as of June 30, 2024[186]