Healthcare Services business, owned through GHG, is the largest healthcare market participant in Georgia, accounting for 20% of the country’s total hospital bed capacity as of 30-Sep-20. Healthcare services business comprises three segments: 1) Hospitals (17 referral hospitals with a total of 2,596 beds) providing secondary and tertiary level healthcare services; 2) Clinics: 19 community clinics with 353 beds (providing outpatient and basic inpatient healthcare services) and 15 polyclinics (providing outpatient diagnostic and treatment services); 3) Diagnostics, operating the largest laboratory in the entire Caucasus region - “Mega Lab”. As of 30-Sep-20, the healthcare services business is 100% owned by Georgia Capital (30-Jun-20: 70.6%) – such are the main figures as provided by the recent report on Georgia Capital PLC Q20 and 9M20 results.
According to the report, following the lifting of COVID-19 related lockdown restrictions in June, which affected hospitals and clinics segments, the healthcare business revenue started to rebound. The trend continued into the 3rd quarter, which saw the number of admissions increase by 17% at clinics, translating into 3Q20 net revenue of GEL 11.6 million, up 11.0% y-o-y. Hospitals also demonstrated a similar trend as the number of admissions was up 3% in 3Q20 y-o-y, while revenue for the period was GEL 57.9 million, largely flat to 2019 level (GEL 58.1 million). The diagnostics segment, which apart from regular diagnostics services is also engaged in COVID-19 testing, almost tripled its quarterly revenue in 3Q20 y-o-y, reaching GEL 3.3 million.
The report says, all this translated into 3.3% y-o-y growth in 3Q20 net revenue from healthcare services. 9M20 healthcare services net revenue was down 8.0% y-o-y, reflecting a reduction in patient footfall at healthcare facilities mainly during COVID-19 lockdown in 2Q20. “The cost of our services in the business are captured in the materials and direct salary rates. The materials rate increased slightly y-o-y in 2020 (up 0.9 ppts and 2.4 ppts at hospitals and up 0.7 ppts and 0.3 ppts at clinics, respectively, in 3Q20 and 9M20), reflecting increased consumption of medical disposables and personal protective equipment at healthcare facilities” – reads the report.
GCAP assesses the 3Q20 direct salary rate remained well-controlled at hospitals (down 2.2 ppts y-o-y) and clinics (down 5.3 ppts y-o-y), leading to a 1.8 ppts y-o-y increase in the healthcare services gross margin. In 9M20, gross margin was down 2.7 ppts y-o-y to 40.2%. Due to the cost optimization measures, the business posted positive operating leverage in 3Q20, translating into a 14.0% y-o-y growth in respective EBITDA earnings excluding IFRS 16. In 3Q20, EBITDA margin (ex. IFRS 16) was 26.4% at hospitals (up 1.4 ppts y-o-y) and 23.3% at clinics (up 6.4% y-o-y). Overall, in 9M20, the business posted GEL 41.1 million EBITDA (ex. IFRS 16), down 23.4% y-o-y.
“Strong liquidity management measures resulted in a 26.9% y-o-y decline in net debt position to GEL 210.4 million as of 30-Sep-20, respectively decreasing 3Q20 interest expense, excluding IFRS 16 impact, by 17.2% to GEL 6.2 million. The depreciation of GEL during 2020 led to a foreign currency loss in 9M20 (GEL 3.1 million (excluding IFRS 16)) on the relatively small portion of the business’s borrowings denominated in foreign currency – reads the reports, adding that the business had non-recurring expenses of GEL 8.8 million in 9M20, mainly related to one-off costs associated with de-listing of GHG from London Stock Exchange, of which, GEL 4.6 million relates to acceleration of share-based expenses for employees. In 3Q20, a loss from discontinued operations of GEL 25.4 million was recorded, resulting from the disposal of a 40% equity stake in HTMC. The business posted net losses from continuing operations excluding IFRS 16 in both 3Q20 and 9M20, which adjusted for FX loss and non-recurring expenses resulted in GEL 5.2 million net profit for 3Q20, (up 141.2% y-o-y) and net loss for 9M20 of GEL 3.0 million (down from GEL 11.5 million in 9M19)”.
