The Good And The Bad: What Investors Should Know About Raffles Medical Group Ltd’s 2017 Second Quarter Earnings
Raffles Medical Group Ltd (SGX: BSL) is a healthcare services provider with a network of healthcare facilities in five countries and thirteen cities. Its current flagship asset is Raffles Hospital in Singapore, a tertiary care hospital located along North Bridge Road. It also has two hospitals under development in China at the moment and they are scheduled to be completed by 2018 and 2019.
In late July, Raffles Medical released its 2017 second quarter results. There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:
1. The overall result
Here are the important numbers from the income statements for Raffles Medical for the second quarters of 2017 and 2016:
Source: Raffles Medical 2017 second quarter results announcement
You can see that the second quarter of 2017 was a flat quarter for Raffles Medical in all, since revenue and profit after tax and minority interests were little-changed.
2. The positives
Firstly, the company continued to generate strong operating cash flow in the reporting quarter. The number was S$26.3 million, up 10.4% from a year ago.
Secondly, Raffles Medical has a strong balance sheet. The company ended the second quarter of 2017 with a net-cash position of S$59.3 million even after paying S$53.6 million in the quarter for investment properties that are under development.
Thirdly, the company has a number of growth initiatives going on. I already mentioned the two new hospitals in China (one in Shanghai, and one in Chongqing) earlier. Then there’s also the expansion of Raffles Hospital that is expected to be completed by the fourth quarter of this year; the opening of four clinics in Singapore in the third quarter; and the extension of Raffles Hospital’s Emergency Care Collaboration with the Ministry of Health for another five years in June 2017.
3. The negatives
Firstly, demand from foreign patients was weaker than expected in the second quarter of 2017, leading to a 1.1% decline in revenue for the Healthcare Services segment.
Secondly, staff costs, and inventories and consumables used, both grew faster than revenue in the reporting quarter. This situation partly resulted in a year-on-year decline of 1.9% in Raffles Medical’s operating profit. On a slightly positive note, the increase in staff costs were due to the recruitment of more specialists, management, and clinical staff in view of the opening of the extension of Raffles Hospital later this year.