康华医疗(03689) - 2024 - 中期财报

Financial Highlights The company reported a slight revenue decrease and net loss in H1 2024, with adjusted EBITDA declining Key Financial Performance for H1 2024 | Metric | Six Months Ended June 30, 2024 (RMB thousands) | Six Months Ended June 30, 2023 (RMB thousands) | Period-over-Period Change | | :--- | :--- | :--- | :--- | | Revenue | 984,518 | 987,498 | -0.3% | | Gross Profit | 146,399 | 170,994 | -14.4% | | Gross Profit Margin | 14.9% | 17.3% | -2.4pp | | (Loss)/Profit Before Tax | (3,100) | 59,081 | N/A | | (Loss)/Profit for the Period | (24,657) | 29,366 | N/A | | (Loss)/Profit Attributable to Owners of the Company | (19,542) | 50,655 | N/A | | Adjusted EBITDA | 91,339 | 129,227 | -29.3% | | (Loss)/Earnings Per Share – Basic (RMB cents) | (5.8) | 15.1 | N/A | - In H1 2024, inpatient visits increased by 8.5% to 38,000, outpatient visits by 5.4% to 758,000, and health check-up visits by 11.6% to 86,000[8][22] - Cardiovascular, Internal Medicine, and Obstetrics & Gynecology were the top three revenue-contributing departments, collectively accounting for 38.7% of hospital service revenue[8][29] Management Discussion and Analysis The company's H1 2024 revenue slightly decreased to RMB 985 million, resulting in a net loss of RMB 24.7 million, driven by various operational and fair value losses Business Review and Outlook Despite new acquisitions, the group's total revenue slightly decreased by 0.3% to RMB 985 million in H1 2024, resulting in a comprehensive loss of RMB 24.7 million Overall Business Overview In H1 2024, the group's comprehensive revenue slightly decreased by 0.3% to RMB 984.5 million, turning from profit to a comprehensive loss of RMB 24.7 million 2024 H1 Performance Overview | Metric | Amount (RMB millions) | Year-over-Year Change | | :--- | :--- | :--- | | Comprehensive Revenue | 984.5 | -0.3% | | Comprehensive (Loss)/Profit | (24.7) | Turned to loss | | Adjusted EBITDA | 91.3 | -29.3% | - The loss during the reporting period was primarily due to: (i) a general decrease in revenue from self-owned hospitals; (ii) the newly acquired hemodialysis business, acquired in January 2024, remaining in a loss-making state; (iii) continued losses from Kangxin Hospital; and (iv) a fair value loss of approximately RMB 11.4 million from an investment in a fund[11][12] - Revenue performance varied across business segments: hospital services revenue decreased by 4.4%, rehabilitation services by 1.7%, elderly healthcare services grew by 18.6%, and the newly acquired hemodialysis services contributed RMB 37.1 million in revenue[13][14][15][18] Hospital Services Hospital services revenue decreased by 4.4% to RMB 881 million, driven by lower average patient expenditure despite increased inpatient and outpatient visits Key Operating Data for Hospital Services Segment | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Inpatient Visits | 37,979 | 35,012 | +8.5% | | Average Expenditure Per Inpatient (RMB) | 13,765.0 | 15,635.9 | -12.0% | | Outpatient Visits | 757,695 | 718,641 | +5.4% | | Average Expenditure Per Outpatient (RMB) | 421.4 | 434.7 | -3.1% | | Health Check-up Visits | 85,350 | 77,376 | +11.6% | | Average Expenditure Per Health Check-up (RMB) | 448.0 | 788.7 | -43.2% | Revenue Performance by Hospital (RMB millions) | Hospital | H1 2024 Revenue | Year-over-Year Change | | :--- | :--- | :--- | | Kanghua Hospital | 732.2 | -4.3% | | Renkang Hospital | 114.4 | -1.3% | | Kangxin Hospital | 34.2 | -14.6% | - Despite a slight 0.1% decrease in total surgeries year-over-year, the volume of complex Grade III and IV surgeries reached 11,561 cases, an increase of 13.6%, indicating an improvement in medical service quality and capability[31] VIP Special Services Total VIP special services revenue decreased by 13.2% to RMB 79.5 million, primarily due to declines in VIP medical services and reproductive medicine VIP Special Services Revenue Breakdown (RMB thousands) | Service Type | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | VIP Medical Services | 53,474 | 61,027 | -12.4% | | Reproductive Medicine | 14,465 | 18,039 | -19.8% | | Plastic and Aesthetic Surgery | 2,373 | 2,206 | +7.6% | | Laser Treatment | 9,191 | 10,293 | -10.7% | | Total | 79,503 | 91,565 | -13.2% | Rehabilitation and other Healthcare Services Rehabilitation and other healthcare services revenue decreased by 1.7% to RMB 59.7 million, with rehabilitation hospitals declining while rehabilitation centers grew - The segment's total revenue was RMB 59.7 million, a year-over-year decrease of 1.7%[37] - Revenue from rehabilitation hospitals and other medical services decreased by 11.7% to RMB 28.3 million, mainly due to the suspension of hemophilia services and new DRG regulations, while rehabilitation center services and other services revenue increased by 9.4% to RMB 31.4 million, primarily driven by pediatric rehabilitation business[40][41] Haemodialysis services segment The newly acquired hemodialysis services segment contributed RMB 37.1 million in revenue in H1 2024, operating 13 centers and showing strong patient flow despite initial losses - The group completed the acquisition of a 70% equity interest in Kanghua Hemodialysis Group in January 2024, with this business segment generating RMB 37.1 million in revenue during the reporting period[43][44] - As of the reporting date, the group operates 13 hemodialysis centers, serving over 780 regular patients, with over 56,000 procedures performed in H1 2024, an increase of over 36.0% year-over-year[43] - Although this segment is currently in a loss-making state, the Board anticipates it will enhance profitability and efficiency, bringing long-term positive returns to the company[44] Elderly Healthcare Services Elderly healthcare services revenue increased by 18.6% to RMB 7 million, driven by increased occupancy and average spending at Renkang Nursing Home - Elderly healthcare services segment revenue was RMB 7 million, an 18.6% year-over-year increase, primarily due to increased patient admissions[18][46] - Renkang Nursing Home has a total of 108 beds, with 138 patient visits during the reporting period, representing a 15% year-over-year increase[46] Industry Outlook and Strategy The group is focusing on enhancing medical quality, strengthening informatization, building a high-end brand, accelerating smart hospital development, and personnel training amidst China's deepening healthcare reforms - China's healthcare reform is rapidly advancing, with DRG/DIP payment reform requiring coverage of all eligible medical institutions by the end of 2025, setting higher standards for private medical institutions[47][49] - The group plans to seize industry opportunities by implementing the "Comprehensive Medical Quality Improvement Action Plan," strengthening information technology, building the Kanghua brand focusing on VIP services, accelerating smart hospital construction, and enhancing personnel training[52] Future Plans for Material Investments and Capital Assets The group is progressing with the Kanghua Qingxi Branch construction, a comprehensive healthcare project for elderly and rehabilitation patients, with Phase I expected to be operational by July 2025 - The Kanghua Qingxi Branch project has a total construction area exceeding 130,000 square meters, planning for 500 inpatient beds and approximately 800 nursing and rehabilitation beds[54] - Phase I of the project is expected to complete its main structure by the end of 2024, interior decoration by June 2025, and commence operations in July 2025, with a total investment of approximately RMB 215.9 million as of the end of the reporting period[54] Financial Review In H1 2024, the group's total revenue slightly decreased by 0.3% to RMB 984.5 million, gross profit declined by 14.4% to RMB 146.4 million, and the company reported a net loss of RMB 24.7 million Segment Revenue Hospital services revenue decreased by 4.4% to RMB 881 million, accounting for 89.5% of total revenue, primarily due to lower average patient expenditure Segment Revenue and Gross Profit (H1 2024, RMB thousands) | Segment | Revenue | Cost of Revenue | Gross Profit | Gross Profit Margin | | :--- | :--- | :--- | :--- | :--- | | Hospital Services | 880,750 | (747,958) | 132,792 | 15.1% | | Rehabilitation and other Healthcare Services | 59,708 | (49,449) | 10,259 | 17.2% | | Haemodialysis Services | 37,092 | (36,906) | 186 | 0.5% | | Elderly Healthcare Services | 6,968 | (3,806) | 3,162 | 45.4% | | Total | 984,518 | (838,119) | 146,399 | 14.9% | - The decrease in hospital services revenue was mainly attributed to a decline in revenue from key departments and reduced average patient expenditure across all service products, despite an increase in patient visits, with the decrease in average expenditure linked to lower payment rates under the DIP model and tighter social security payment quotas[62] Cost of Revenue Total cost of revenue increased by 2.6% to RMB 838 million, with hospital services costs slightly decreasing, while employee-related costs rose due to salary increases and acquisitions - The cost of revenue for the hospital services segment decreased by 1.7% year-over-year to RMB 748 million, primarily due to reduced drug and consumable costs from lower business volume, partially offset by increased staff costs and rental expenses[68] - During the reporting period, drugs, medical consumables, and staff costs accounted for 25.9%, 25.8%, and 34.2% of total cost of revenue, respectively (compared to 26.7%, 26.4%, and 33.2% in the same period of 2023)[73] Gross Profit and Gross Profit Margin The group's total gross profit decreased by 14.4% to RMB 146.4 million, with the overall gross profit margin declining from 17.3% to 14.9% - Total gross profit was RMB 146.4 million, a year-over-year decrease of 14.4%[74] - The overall gross profit margin decreased from 17.3% in the same period last year to 14.9%[74] Other Income Other income remained stable at approximately RMB 21.2 million, with a decrease in structured deposit investment income offset by increases in clinical trial and bank interest income - Total other income was RMB 21.2 million, a slight year-over-year decrease of 0.1%[77] - Key changes include: a decrease in structured deposit investment income to RMB 4.1 million (H1 2023: RMB 6.4 million), and an increase in clinical trial and related income to RMB 7.3 million (H1 2023: RMB 5.3 million)[77] Other Expenses, Gains and Losses This item recorded a net loss of RMB 9.9 million, primarily due to an RMB 11.4 million unrealized fair value loss from an investment fund, partially offset by net exchange gains - A net loss of RMB 9.9 million was recorded, compared to a net gain of RMB 1.1 million in the same period last year[79] - The main reason was a fair value loss of RMB 11.4 million on financial assets at fair value through profit or loss (H1 2023: gain of RMB 1.7 million)[79] Administrative Expenses Administrative expenses increased by 11.8% to RMB 140.5 million, driven by higher staff costs due to salary increases and acquisitions, as well as increased rental and property management fees - Administrative expenses amounted to RMB 140.5 million, an 11.8% year-over-year increase[85] - Reasons for the increase include: (i) higher administrative staff costs due to general salary increases and the acquisition of the hemodialysis business; (ii) increased rental and property management fees; and (iii) higher repair and maintenance and other administrative expenses[85] Finance Costs Finance costs significantly increased by 168.2% to RMB 17.1 million, primarily due to a one-off recognition of unamortized bank arrangement fees upon repayment of a major bank loan - Finance costs were RMB 17.1 million, a year-over-year increase of 168.2%[86] - The surge in costs was mainly due to the one-off recognition of approximately RMB 11.7 million in remaining unamortized bank arrangement fees upon the full repayment of a major bank loan[86] (Loss)/Profit for the Period The group recorded a loss of RMB 24.7 million for the period, compared to a profit of RMB 29.4 million in the prior year, with loss attributable to owners of the company at RMB 19.5 million (Loss)/Profit for the Period (RMB millions) | Metric | H1 2024 | H1 2023 | | :--- | :--- | :--- | | (Loss)/Profit for the Period | (24.7) | 29.4 | | (Loss)/Profit Attributable to Shareholders | (19.5) | 50.7 | Adjusted EBITDA Adjusted EBITDA decreased by 29.3% to RMB 91.3 million, indicating stable core business operations despite the decline, as it excludes non-core operating items Adjusted EBITDA Reconciliation (RMB thousands) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | (Loss)/Profit Before Tax | (3,100) | 59,081 | | Add: Finance Costs | 17,061 | 6,361 | | Add: Depreciation and Amortization | 75,078 | 72,970 | | EBITDA | 89,039 | 138,412 | | Add: Fair Value Loss/(Gain) on Financial Assets | 11,400 | (1,718) | | Less: Investment Income | (4,075) | (6,384) | | Less: Exchange (Gain)/Loss | (1,815) | 493 | | Less: Bank and Other Interest Income | (3,210) | (1,576) | | Adjusted EBITDA | 91,339 | 129,227 | Financial Position As of June 30, 2024, the group's total assets were RMB 2.65 billion, with net assets of RMB 1.43 billion, while net current assets decreased to RMB 188 million Property, Plant and Equipment, Right-of-use assets and Deposits Paid for Acquisition of Property, Plant and Equipment During the reporting period, the group spent RMB 24.9 million on property, plant, and equipment and RMB 29.2 million on construction in progress, with additional assets recognized from subsidiary acquisitions - During the reporting period, the group incurred RMB 24.9 million in expenditures for property, plant and equipment, and RMB 29.2 million for construction in progress[102] - Due to the acquisition of subsidiaries, new property, plant and equipment of RMB 30.9 million and new right-of-use assets of RMB 36.1 million were recognized[104] Accounts and Other Receivables Accounts receivable increased to RMB 312 million, extending the turnover days from 43.5 to 52.3, primarily due to increased receivables from social security funds and corporate clients, and new acquisitions - Accounts receivable increased from RMB 257 million to RMB 312 million, with average turnover days extending from 43.5 days to 52.3 days[107] - The increase in accounts receivable was mainly due to higher balances from social security funds, other government departments, and certain corporate clients, as well as the impact of the hemodialysis business acquisition[107] Accounts and Other Payables and Provision Total accounts and other payables and provisions increased to RMB 689 million, with accounts payable rising to RMB 367 million due to the hemodialysis business acquisition - Total accounts and other payables and provisions increased from RMB 660 million to RMB 689 million[110] - Accounts payable increased to RMB 367 million (end of 2023: RMB 317 million), primarily impacted by the acquisition of the hemodialysis business[110] Net Current Assets and Net Assets As of June 30, 2024, the group's net current assets significantly decreased to RMB 188.1 million from RMB 328.8 million, and net assets also reduced to RMB 1,427.2 million Asset Status (RMB millions) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net Current Assets | 188.1 | 328.8 | | Net Assets | 1,427.2 | 1,497.5 | Liquidity and Capital Resources The group's financial position remains sound, but liquidity has tightened, with cash and equivalents decreasing to RMB 106 million and increased net cash outflows from investing and financing activities Financial Resources As of the period end, the group held RMB 106 million in cash and equivalents, RMB 65.1 million in time deposits, and RMB 387 million in financial assets at fair value through profit or loss Key Financial Resources (RMB millions) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 105.9 | 305.2 | | Time Bank Deposits | 65.1 | 63.4 | | Financial Assets at Fair Value Through Profit or Loss | 387.0 | 383.4 | Cash Flow Analysis Net cash inflow from operating activities decreased by 22.0% to RMB 48.8 million, while investing activities turned to a net outflow of RMB 49.8 million, and financing activities' net outflow expanded to RMB 198 million Cash Flow Statement Summary (RMB thousands) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 48,783 | 62,571 | | Net Cash Flow (Used in)/From Investing Activities | (49,824) | 18,351 | | Net Cash Used in Financing Activities | (198,102) | (60,406) | | Net (Decrease)/Increase in Cash and Cash Equivalents | (199,143) | 20,516 | Significant Investment, Acquisition and Disposal The group completed the acquisition of a 70% equity interest in Kanghua Hemodialysis Group for RMB 7.7 million on January 9, 2024, resulting in RMB 114.2 million in goodwill - On January 9, 2024, the company completed the acquisition of a 70% equity interest in Kanghua Hemodialysis Group for a consideration of RMB 7.7 million[126] - This acquisition generated goodwill of RMB 114.2 million, primarily reflecting the acquired entity's employee team, established network of outpatient centers, and potential synergies[129][297] Use of Proceeds from the Initial Public Offering As of June 30, 2024, RMB 422 million of the IPO net proceeds of approximately RMB 783 million has been utilized, with RMB 361 million remaining for future business expansion, facility upgrades, and potential M&A IPO Proceeds Usage and Utilization (RMB millions) | Purpose | Intended Use Amount | Utilized as of June 30, 2024 | Unutilized Amount | | :--- | :--- | :--- | :--- | | Business Expansion and Facility Upgrades | 352.1 | 134.7 | 217.4 | | Expansion of Hospital Management Operations | 78.3 | 0 | 78.3 | | Selective Mergers and Acquisitions | 273.9 | 208.8 | 65.1 | | Working Capital and Others | 78.3 | 78.3 | 0 | | Total | 782.6 | 421.8 | 360.8 | Indebtedness The group's secured bank loan balance significantly decreased to RMB 69 million due to a major loan repayment, funded partly by an advance from the controlling company, leading to a reduced gearing ratio of 4.8% - Secured bank loans decreased from RMB 319 million at the end of 2023 to RMB 69 million, as the loan related to Kangxin Hospital Phase II project was fully repaid[141] - To repay the bank loan, the group received an advance of RMB 177 million from its direct controlling company, Kanghua Group, at an annual interest rate of 3.7%, due within two years[144] - As of the period end, the group's gearing ratio (total interest-bearing bank loans / total equity) significantly decreased to 4.8% from 21.3% at the end of 2023[156] Employees, Remuneration Policies and Training Schemes As of June 30, 2024, the group had 4,231 full-time employees, with total employee-related costs increasing by 7.9% to approximately RMB 336 million - As of June 30, 2024, the group's total number of full-time employees was 4,231, higher than 3,946 at the end of 2023[158] - Employee-related costs (excluding remuneration for directors, supervisors, and senior management) for the reporting period were approximately RMB 336.3 million, an increase from RMB 311.6 million in the same period last year[158] Corporate Governance Highlights The company's interim results and report have been reviewed by the audit committee and external auditor, with no interim dividend recommended Interim Dividend The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024, consistent with the prior year's policy - The Board does not recommend the payment of an interim dividend for 2024[162] Review of Interim Report The group's 2024 interim results and report have been reviewed by the company's audit committee and external auditor, Tianzhi Hong Kong Certified Public Accountants Limited - The company's audit committee has reviewed this interim report[165] - The company's auditor has reviewed the interim financial information in accordance with Hong Kong Standard on Review Engagements 2410[165] Other Information This section details the interests of directors, supervisors, and chief executive in the company's securities Directors', Supervisors' and Chief Executive's Interests in Securities As of June 30, 2024, Chairman Mr. Wang Junyang held 66.54% of the company's total share capital through controlled corporations, with other executive directors also holding significant interests Major Directors' Shareholdings | Director Name | Share Class | Nature of Interest | Number of Shares | Approximate Percentage of Company's Total Issued Share Capital | | :--- | :--- | :--- | :--- | :--- | | Mr. Wang Junyang | Domestic Shares | Interest in controlled corporation | 222,500,000 | 66.54% | | Mr. Chen Wangzhi | Domestic Shares | Interest in controlled corporation; spouse's family interest | 27,500,000 | 8.22% | | Ms. Wang Aiqin | Domestic Shares | Interest in controlled corporation; spouse's family interest | 27,500,000 | 8.22% | | Mr. Wang Weixiong | Domestic Shares | Interest in controlled corporation | 25,000,000 | 7.48% | Interim Condensed Consolidated Financial Information This section presents the interim condensed consolidated financial statements, including the statement of profit or loss, financial position, and cash flows Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the group reported revenue of RMB 984.5 million, a gross profit of RMB 146.4 million, and a total loss for the period of RMB 24.7 million H1 2024 Profit or Loss Statement Summary (RMB thousands) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 984,518 | 987,498 | | Gross Profit | 146,399 | 170,994 | | (Loss)/Profit Before Tax | (3,100) | 59,081 | | Income Tax Expense | (21,557) | (29,715) | | (Loss)/Profit for the Period | (24,657) | 29,366 | | (Loss)/Profit Attributable to Owners of the Company | (19,542) | 50,655 | | Basic (Loss) Per Share (RMB cents) | (5.8) | 15.1 | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2024, the group's total assets were RMB 2.653 billion, total liabilities RMB 1.225 billion, and total equity RMB 1.427 billion, with non-current assets increasing and current assets decreasing Financial Position Statement Summary (RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Non-Current Assets | 1,691,938 | 1,529,480 | | Total Current Assets | 960,771 | 1,095,506 | | Total Current Liabilities | 772,654 | 766,699 | | Total Non-Current Liabilities | 452,838 | 360,760 | | Net Assets | 1,427,217 | 1,497,527 | | Total Equity | 1,427,217 | 1,497,527 | Interim Condensed Consolidated Statement of Cash Flows In H1 2024, net cash inflow from operating activities was RMB 48.8 million, while investing and financing activities resulted in net outflows, leading to a net decrease of RMB 199 million in cash and equivalents Cash Flow Statement Summary (RMB thousands) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 48,783 | 62,571 | | Net Cash (Used in)/From Investing Activities | (49,824) | 18,351 | | Net Cash Used in Financing Activities | (198,102) | (60,406) | | Net (Decrease)/Increase in Cash and Cash Equivalents | (199,143) | 20,516 | | Cash and Cash Equivalents at End of Period | 105,920 | 285,016 |