MD Medical Group Investments Plc: MD Medical Group maintains strong EBITDA margin

 MD Medical Group maintains strong EBITDA margin

3 April 2023 – MD Medical Group Investments Plc (“MD Medical Group,” “MDMG,” the “Group” or the “Company” – LSE and MOEX: MDMG), a leading Russian private healthcare provider, announces its audited consolidated financial statements for the 12 months ended 31 December 2022 under International Financial Reporting Standards (IFRS).

Key financial highlights for 2022:

• Total revenue remained flat year-on-year (y-o-y) at RUB 25,222 million.
• EBITDA went down by 4.3% y-o-y to RUB 7,924 million. EBITDA margin dropped by 1.4 p.p. y-o-y to 31.4%.
• Adjusted net profit decreased by 1.5% y-o-y to RUB 6,005 million. Adjusted net profit margin was 23.8%.
• Operating cash flow declined by 9.0% y-o-y to RUB 7,734 million.
• Capex amounted to RUB 1,169 million, down 69.2% y-o-y. Investments were mainly allocated towards the launch of new projects: MD Group Lakhta in St Petersburg, MD Tyumen-2 and an out-patient clinic in Yekaterinburg.
• As at 31 December 2022, the Group’s net cash position stood at RUB 3,866 million. The net cash position to EBITDA ratio was 0.5x.

Key operational highlights for 2022[1]:

• Total out-patient treatments decreased slightly, by 1.7% y-o-y, to 1,826,555.
• Total in-patient treatments decreased by 3.0% y-o-y to 148,775.
• Total IVF cycles increased by 2.0% y-o-y to 16,862.
• Total deliveries increased by 2.1% y-o-y to 8,576.

Key events in 2022 and after the reporting period:

• Hospital launched in St Petersburg. In January 2022, MD Medical Group opened a new multi-functional hospital MD Group Lakhta in St Petersburg. Its core business is women’s and children’s healthcare with a focus on childbirth and gynaecological surgery. Total investments in the project amounted to circa RUB 2 billion.
• Hospital launched in Tyumen. In February 2022, MD Medical Group launched a new multi-disciplinary hospital MD Tyumen-2. Total investments in the project amounted to approximately RUB 1 billion.
• Novosibirsk Centre for Reproductive Medicine renovated. In June 2022, MD Medical Group completed the renovation of its medical centre in Novosibirsk, increasing its capacity to 1,000 IVF cycles per year. Total investments in the project amounted to some RUB 23 million.
• Medical centre opened in Moscow. In June 2022, MD Medical Group opened a new out-patient medical centre, Mother & Child Butovo, with a capacity of up to 30,000 appointments per year. Total investments in the project amounted to circa RUB 16 million.
• MGIMO Med University launched. On 1 September 2022, MD Medical Group jointly with the Moscow State Institute of International Relations (MGIMO) opened the MGIMO Med University.
• Dividends for H1 2022. On 26 October 2022, the Board of Directors approved the payment of an interim dividend of RUB 642 million or RUB 8.55 per ordinary share / GDR for 6M 2022.
• First clinic launched in Yekaterinburg. In November 2022, MD Medical Group opened an out-patient clinic with a focus on IVF in Yekaterinburg. The clinic can handle up to 400 gynecological surgeries, about 800 IVF cycles and over 30,000 appointments per year. Total investments in the project amounted to circa RUB 74 million.

• Credit facilities repaid early. In 2022, the Company fully repaid all its existing credit facilities by settling outstanding obligations in the amount of RUB 3,133 million ahead of schedule. The funds had been borrowed to finance the construction of hospitals in Samara, Novosibirsk and Tyumen.
• Medical centre opened in the Moscow Region. On 13 January 2023, MD Medical Group opened a new out-patient medical centre, Mother & Child Mytishchi, with a capacity of up to 24,000 appointments per year. Total investments in the project stood at around RUB 23 million.

2022 Financial Highlights

Revenue

Total revenue in 2022 remained flat y-o-y at RUB 25,222 million. Revenue of the Group’s hospitals in Moscow declined by 7.1% y-o-y due to a decrease in COVID-19 diagnostic and treatment services driven by the pandemic slowdown, which was fully offset by a spike in revenue of regional hospitals and out-patient clinics. The growth was mainly driven by a stable demand for IVF in Moscow and the Moscow Region (the Group’s revenue from IVF up 9.9% y-o-y), on-target capacity utilisation rates at regional hospitals (revenue up 12.1% y-o-y) amid a post-COVID recovery in demand for medical services, and strong performance of new projects – MD Group Lakhta and the medical cluster in Tyumen.

Revenue from medical services not related to women’s and children’s health accounted for 47.9% of total revenue, down from 51.2% in 2021.

2022 Key Operating Expenses[2]

Gross profit

Gross profit in 2022 declined by 1.9% y-o-y to RUB 9,793 million. Gross profit margin decreased by 0.8 p.p. y-o-y to 38.8% primarily due to a rise in personnel costs as a result of business expansion associated with the launch of MD Group Lakhta and MD Tyumen-2.

Impact of key operating expenses

In the reporting period, the Company's key  operating expenses remained tightly controlled and slightly increased by 1.4 p.p. y-o-y as a percentage of revenue (to 63.1%) amid the growth of personnel costs and functional expenses.

The share of personnel costs grew by 2.4 p.p. y-o-y as a percentage of revenue (to 40.2%) mainly due to a decline in COVID-19 diagnostic and treatment services (resulting from a higher share of fixed costs) and the opening of new facilities (MD Group Lakhta and MD Tyumen-2) and their gradual ramp-up to design capacity.

The share of materials expenses decreased by 1.8 p.p. y-o-y as a percentage of revenue (to 20.3%) on the back of a reduction in material-intensive services in the Company's portfolio, including therapy related to COVID-19.

The share of medical services expenses declined by 0.1 p.p. y-o-y as a percentage of revenue (to 1.2%) due to the gradual vertical integration of business processes, including the opening of the Company’s own laboratory and data processing centre.

The share of functional expenses increased by 0.2 p.p. y-o-y as a percentage of revenue (to 1.3%), driven by the growth in marketing expenses amid the Group’s business expansion.

EBITDA

EBITDA declined by 4.3% y-o-y and amounted to RUB