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New Frontier Health Corporation Announces Fourth Quarter and Fiscal 2019 Financial Results

2020年03月26日 PM06:30
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BEIJING

New Frontier Health Corporation (“NFH” or “the Company”) (NYSE: NFH), operator of the premium healthcare services provider United Family Healthcare (“UFH”), today announced the unaudited financial results of Healthy Harmony Holdings, L.P. and its subsidiaries (“Healthy Harmony”) for the fourth quarter and fiscal year ended December 31, 20191.

For management purposes, the Company is organized into business units based on the category and stage of development of the Company’s healthcare facilities and geographic locations, and has three reportable operating segments as follows:

(a) Tier 1 Operating Assets: the existing general healthcare facilities located in tier 1 cities in China, such as Beijing United Family Hospital and Shanghai Puxi United Family Hospital, and their associated clinics.

(b) Tier 2 Operating and Other Assets: the existing general healthcare facilities located in tier 2 cities in China, such as Tianjin United Family Hospital, Qingdao United Family Hospital, and other assets, such as a Beijing United Family Rehabilitation Hospital and other clinic assets.

(c) Expansion Assets: the facilities recently opened or about to open including Pudong United Family Hospital, Guangzhou United Family Hospital, and Beijing Datun United Family Hospital.

Financial and Operating Highlights2

For the Quarter Ended December 31, 2019:

  • Revenue increased by 13.9% to RMB639.7 million from RMB561.5 million.
  • Net loss increased to RMB223.2 million from RMB4.1 million, mainly resulted from one-time transaction related costs3 of RMB147.5 million and an expanded cost basis partially due to the two new hospitals in Guangzhou and Shanghai Pudong, as well as one-off relocation costs related to the move to the expanded facility for PXU.
  • Pro-forma adjusted EBITDA4 increased by 218.2% to RMB27.6 million.
  • Tier 1 Operating Assets: revenue increased by 6.4% to RMB462.2 million from RMB434.4 million, pro-forma adjusted EBITDA decreased by 5.8% to RMB109.5 million due to an increase in full time medical staff headcounts to support the expanding service lines, as well as additional one-off year-end bonuses awarded for over-achieving 2019 full year budget targets.
  • Tier 2 Operating and Other Assets: revenue increased by 8.6% to RMB95.9 million from RMB88.3 million and adjusted EBITDA5 (before IFRS 16 adoption) increased by 117.9% to RMB0.6 million from RMB(3.2) million due to increases in patient volume and continued ramping up at tier 2 operating facilities.
  • Expansion Assets: revenue increased by 98.9% to RMB81.6 million from RMB38.8 million and adjusted EBITDA (before IFRS 16 adoption) improved to RMB(37.0) million from RMB(64.4) million due to the continued ramp-up of expansion assets.

For the Fiscal Year Ended December 31, 2019:

  • Revenue increased by 19.0% to RMB2,449.2 million from RMB2,058.8 million.
  • Net loss increased to RMB430.3 million from RMB154.0 million, mainly resulted from one-time transaction related costs2 of RMB160.1 million and an expanded cost basis partially due to the two new hospitals in Guangzhou and Shanghai Pudong, as well as costs related to the move to the expanded Shanghai Puxi facility.
  • Pro-forma adjusted EBITDA increased by 93.0% to RMB162.9 million.
  • Tier 1 Operating Assets: revenue increased by 9.1% to RMB1,810.7 million from RMB1,659.9 million, pro-forma adjusted EBITDA increased by 15.0% from RMB419.9 million, demonstrating stable growth for both outpatient and inpatient volume as well as improved cost efficiency in tier 1 operating assets.
  • Tier 2 Operating and Other Assets: revenue increased by 17.7% to RMB358.8 million from RMB304.9 million and adjusted EBITDA (before IFRS 16 adoption) improved to RMB(0.2) million from RMB(9.4) million, with tier 2 operating and other assets approaching breakeven as a group.
  • Expansion asset revenue increased by 187.6% to RMB279.6 million from RMB94.1 million and adjusted EBITDA (before IFRS 16 adoption) improved to RMB(161.4) million from RMB(185.3) million, achieving significant progress and is in line with the strong ramp up expectation.
  • Outpatient visits increased by 11.7% to 632,664 from 566,337.
  • Inpatient admissions increased by 22.1% to 10,805 from 8,849.
  • Bed utilization rate* increased to 38.3% from 29.3%.

* Bed utilization is calculated based on the weighted average maximum bed capacity of the year.

Mr. Antony Leung, Chairman of NFH said: “New Frontier Health successfully completed the acquisition of United Family Healthcare in December and delivered strong financial results for 2019. We are delighted to see that UFH has continued its growth in operating assets and ramp up speed of its expansion assets. Looking forward, we remain committed to building and growing our integrated healthcare platform to provide world-class, quality healthcare services to patients in China.”

Ms. Roberta Lipson, Chief Executive Officer of NFH and founder of UFH, commented, “A number of operating achievements helped drive our growth this quarter. Revenue in operating assets continued to grow based on ever-wider recognition of our brand and consumers’ continued confidence in our services, as well as continued expansion of service lines. We moved our original Shanghai Puxi hospital to its new, larger quarters at the end of the year, tripling the capacity of the hospital in a newer and more attractive space. Our Tier 2 Operating Assets also experience strong growth and our expansion assets continued to ramp up as well.”

“As we began 2020, the coronavirus outbreak in China had an impact on China as a whole and on our operations,” she continued. “Looking beyond the outbreak, we see many opportunities to grow our business. As we continue to deliver premium, high-quality services, we are focused on growing our business and shareholder value by driving patient volume, promoting growth within our practice verticals, and growing our network.”

Key Operating Metrics

2018

 

2019

 

Y-o-Y Growth %

Outpatient
Volume

 

Inpatient
Admission

 

Outpatient
Volume

 

Inpatient
Admission

 

Outpatient
Volume

 

Inpatient
Admission

Tier 1 Operating Assets(1)

447,174

 

6,470

 

473,471

 

6,924

 

5.9%

 

7.0%

Tier 2 Operating and Other Assets(2)

77,159

 

2,177

 

87,511

 

2,374

 

13.4%

 

9.0%

Operating Assets Subtotal

524,333

 

8,647

 

560,982

 

9,298

 

7.0%

 

7.5%

Expansion Assets(3)

42,004

 

202

 

71,682

 

1,507

 

70.7%

 

646.0%

Total UFH

566,337

 

8,849

 

632,664

 

10,805

 

11.7%

 

22.1%

(1)

Tier 1 Operating Assets: The increase in outpatient volume was driven by several key departments including family medicine, demonstrating Chinese patients’ continued acceptance of the family medicine and primary care, a cornerstone of UFH’s clinical philosophy. Inpatient volume was driven by partially by growth in paediatrics and orthopaedics. 

(2)

Tier 2 Operating and Other Assets: The strong growth of outpatient volume was due to the ramp up of current service lines and newly added specialties, including ophthalmology, dermatology and hydrotherapy. The increase of both inpatient admissions and bed utilization was driven by pediatrics, neurorehabilitation, and other specialties. 

(3)

Expansion Assets: Shanghai Pudong Hospital (“PDU”) and Guangzhou United Family Hospital (“GZU”) saw fast ramp-up in both outpatient and inpatient volume across all specialties. Furthermore, both hospitals have also made early progress in developing higher acuity / complex specialties, including internal medicine, emergency services, and orthopaedics, during 2019.  Hospitals in the Expansion Assets group have started executing a number of more  complex surgeries such as breast cancer surgery, complicated endoscopic gastrointestinal surgery, intestinal massive tumor removal, kidney surgery, thyroid cancer surgery, knee and shoulder joint arthroscopies. 

 

Fourth Quarter and Fiscal Year 2019 Results (RMB mm)

2019 Actual

 

Y-o-y Change %

Revenue

Q4

 

FY2019

 

Q4

 

FY2019

BJU (incl. clinics)(1)

333.3

 

1,302.1

 

6.9%

 

11.5%

PXU (incl. clinics)(2)

129.0

 

508.6

 

5.1%

 

3.3%

Tier 2 (TJU, QDU, Rehab) & Other Assets(3)

95.9

 

358.8

 

8.6%

 

17.7%

Operating Asset(4)

558.1

 

2,169.6

 

6.8%

 

10.4%

Tier 1 (GZU, PDU, DTU)

79.5

 

272.3

 

94.6%

 

181.6%

Shenzhen (mgmt. contract)

1.8

 

5.8

 

 

 

 

Tier 2

0.4

 

1.6

 

 

 

 

Expansion Assets(5)

81.6

 

279.6

 

110.4%

 

197.3%

Total(6)

639.7

 

2,449.2

 

13.9%

 

19.0%

(1)

 

 BJU: Revenue of Beijing United Family Hospital (“BJU”) and its associated clinics grew 11.5% yoy in 2019 compared to 2018. BJU’s strong revenue growth in 2019 was primarily driven by an increase in volume in BJU’s family medicine, internal medicine, and emergency services departments, as well as the development of higher acuity departments such as orthopaedics. BJU was one of the first hospitals in China to use the Mako Robot, an orthopaedic surgical system that helps surgeons to achieve greater precision in joint replacement surgeries. In addition, BJU was one of a few private hospitals during 2019 to receive Good Clinical Practice (GCP) approval from the China Food and Drug Administration (CFDA), which allows the hospital to conduct clinical drug trials, providing an excellent opportunity for additional growth as well as for gaining enhanced recognition as a clinical research institution. Oncology service also grew 28% yoy. Moreover, UFH’s Beijing clinical network added two international school nursing clinics in 2019.

(2)

PXU: Shanghai Puxi United Family Hospital (“PXU”) and its associated clinics recorded 3.3% yoy revenue growth in 2019 compared to 2018, which was primarily driven by an increase in volume in PXU’s orthopaedics and surgery departments. The growth for most of 2019 was somewhat impeded by space constraints of the aging facility (in operation since 2005). PXU successfully relocated its business operations to its new, more spacious facility in the second week of October 2019. The new facility is approximately three times larger in size and boasts new, advanced equipment such as 3.0T MRI and hybrid operating theaters, which are expected to contribute further to its revenue growth in fiscal 2020. The management team had previously assumed that PXU would relocate in the second quarter of 2019, however, the move was delayed to the fourth quarter of 2019 due to a delay in receiving necessary medical licensing approvals.  the Shanghai network was further enhanced in 2019 with the addition of five international school nursing clinics. 

(3)

Tier 2 operating and other assets: Revenue from UFH’s tier two facilities and other assets, as a group, grew at 17.7% yoy in 2019. This growth was primarily driven by the continued ramp-up of Qingdao United Family Hospital (“QDU”) and an increase in postpartum patient volume at Beijing United Family Rehabilitation Hospital (“Rehab”), a result of increased recognition by patients of the benefits of medically-based postpartum care, a service line pioneered by UFH. Moreover, Tianjin United Family Hospital (“TJU”) continued to grow in 2019, adding new video incubator technology to the IVF clinic. Furthermore, Rehab opened a new High Dependency Unit (HDU) in 2019, adding a new, high-margin service line to this facility and is already supporting a number of acute patients with ventilator-based 24-hour intensive care.

(4)

Total operating assets as a group grew 10.4% yoy in 2019.

(5)

Expansion assets: UFH’s Guangzhou United Family Hospital (“GZU”) and Shanghai Pudong United Family Hospital (“PDU”) formally launched with complete practicing licenses [1] in the fourth quarter of 2018. As a result of the strong ramp up, driven by increased brand recognition and new patient uptake, of GZU and PDU in 2019, revenue for UFH’s expansion assets, as a group, increased from RMB94.1 million in 2018 to RMB279.6 million in 2019. GZU and its associated clinics and PDU have generated an annualized revenue of RMB331.9 million based on December 2019 monthly revenue.

(6)

Despite the delay in the relocation to the new expanded PXU facility, UFH’s facilities, as a whole, achieved organic revenue growth of 19.0% yoy in 2019 compared to 2018, which demonstrated strong performance across the group.

 

Fourth Quarter and Fiscal Year 2019 Results (RMB mm)

EBITDA

2019 Actual

 

Y-o-y Change %

Q4

 

FY2019

 

Q4

 

FY2019

Adjusted EBITDA before IFRS 16 adoption

 

 

 

 

 

 

 

Tier 1 Operating Assets (BJM, PXU)(1)

107.6

 

463.8

 

(7.5%)

 

10.4%

Tier 2 Operating (TJU, QDU, Rehab) & Other Assets(3)

0.6

 

(0.2)

 

117.9%

 

97.4%

Operating Assets(4)

108.1

 

463.5

 

(4.4%)

 

12.9%

Expansion Assets(5)

(37.0)

 

(161.4)

 

42.5%

 

12.9%

HQ

(45.4)

 

(158.5)

 

(13.3%)

 

(12.6%)

Total EBITDA before IFRS 16 adoption(6)

25.7

 

143.6

 

196.0%

 

70.1%

 

 

 

 

 

 

 

Pro-forma Adjusted EBITDA:

 

 

 

 

 

 

 

Pro-forma Adjustments for PXU(2)

1.9

 

19.3

 

 

 

 

Tier 1 Operating Pro-forma Adjusted EBITDA(2)

109.5

 

483.1

 

(5.8%)

 

15.0%

Operating Assets Pro-forma Adjusted EBITDA(4)

110.1

 

482.8

 

(2.7%)

 

17.6%

Total Pro-forma Adjusted EBITDA(6)

27.6

 

162.9

 

218.2%

 

93.0%

(1)

 Tier 1 operating assets: As a result of improved physician productivity and increased efficiencies in selling, general and administrative expenses, BJU, PXU, and their associated clinics (together, “Tier 1 operating assets”) achieved adjusted EBITDA (before IFRS 16 adoption) growth of 10.4% yoy in 2019 compared to 2018. Adjusted EBITDA (before IFRS 16 adoption) was impacted by the “double rent” effect of PXU, where UFH paid rent for both the old site and new site in 2019. Despite the impact of the double rent burden, adjusted EBITDA margin (before IFRS 16 adoption) for Tier 1 Operating Assets increased to 25.6% in 2019 compared to 25.3% in 2018, primarily due to cost controls and operational improvements. 

(2)

Pro-forma adjustments: PXU successfully completed its relocation to its new, more spacious facility in the second week of October 2019. The adjustments include (i) giving a pro forma effect to annual rent reimbursement of approximately RMB15 million which took effect in November 2019 as if such reimbursement commenced on January 1, 2019, (ii) adding back RMB 3.7 million for additional rental expenses incurred prior to the PXU relocation due to space constraints, and (iii) RMB 3.7 million of ongoing net savings on fees payable to our business partner for this property in accordance with the rental reimbursement. Tier 1 Operating Assets recorded 15.0% yoy pro-forma adjusted EBITDA growth in 2019 and EBITDA margin improved to 26.7% in 2019, compared to 25.3% in 2018.

(3)

 

Tier 2 operating and other assets: TJU, Rehab, QDU, and other clinics in 2nd tier cities achieved adjusted EBITDA of (0.2) million in 2019, compared to (9.4) million in 2018, due to increase in patient volume and bed utilization rates. This group is expected to generate positive EBITDA from 2020 onwards. Rehab has reached break even in 2019 mostly due to the increase in inpatient volume. In addition, the adjusted EBITDA margin of TJU has continued to grow mainly due to the development of higher acuity departments such as surgical and emergency services. 

(4)

Total operating assets: UFH’s operating assets, as a group, achieved adjusted EBITDA (before IFRS 16 adoption) growth of 12.9% yoy as of 2019 at 21.4% adjusted EBITDA margin. With pro-forma adjustment, total operating assets achieved 17.6% yoy pro-forma adjusted EBITDA growth in 2019 at 22.3% pro-forma adjusted EBITDA margin.

(5)

Expansion assets: Expansion assets, as a group, experienced a decrease in total adjusted EBITDA loss (before IFRS 16 adoption) from RMB(126.6) million (or -220.9% of revenue) in the second half of 2018 to RMB(77.0) million (or -49.5% of revenue) in the same period of 2019. This decrease was primarily due to the strong ramp up in specialties where UFH has established strong brand recognition for the past 22 year of operation, such as the OB/GYN, paediatrics, family medicine, and post-partum rehabilitation practices at both GZU and PDU. In addition, the management contract of the asset light model at the Shenzhen facility started to generate adjusted EBITDA in 2019. UFH is currently overseeing the planning and renovation process of the Shenzhen hospital, and is in return receiving a branding/management fee. 

(6)

UFH’s total adjusted EBITDA (before IFRS 16 adoption) for 2019 was RMB143.6 million, or 70.1% yoy growth. With the above-mentioned pro-forma rental related adjustments made for PXU, total pro-forma adjusted EBITDA (before IFRS 16 adoption) in 2019 was RMB162.9 million, or 93.0% yoy growth.

FINANCIAL RESULTS

Unaudited Fourth Quarter of 2019 Results

Revenues were RMB639.7 million ($91.9 million) in the fourth quarter, representing an increase of 13.9% yoy from RMB561.5 million in the fourth quarter of 2018. The increase was primarily driven by growth in both operating assets and expansion assets.

  • Tier 1 Operating Assets: revenue increased by 6.4% yoy to RMB462.2 million from RMB434.4 million, pro-forma adjusted EBITDA decreased by 5.8% to RMB109.5 million, and adjusted EBITDA (before IFRS 16 adoption) decreased by 7.5% to RMB107.6 million from RMB116.3 million, due to an increase in medical staff headcounts to support expanding service line and additional year-end bonuses accrued for achieving 2019 full year targets.
  • Tier 2 operating and Other Assets: revenue increased by 8.6% yoy to RMB95.9 million from RMB88.3 million and adjusted EBITDA (before IFRS 16 adoption) increased by 117.9% to RMB0.6 million from RMB(3.2) million due to increases in patient volume and continued ramping up at tier 2 operating facilities.
  • Expansion Assets: revenue increased by 98.9% yoy to RMB81.6 million from RMB38.8 million, and adjusted EBITDA (before IFRS 16 adoption) improved to RMB(37.0) million from RMB(64.4) million, due to the strong ramp-up of expansion assets.

Operating expenses were RMB802.8 million ($115.3 million) in the fourth quarter, representing an increase of 40.0% yoy from RMB573.3 million.

  • Salaries, wages and benefits expenses increased 24.4% yoy to RMB375.6 million from RMB302.0 million due to new hiring in both operating and expansion assets in tier 1 cities.
  • Supplies and purchased medical services expenses increased 19.6% yoy to RMB111.6 million from RMB93.3 million due to expansion of labor, delivery, recovery, postpartum, and vaccination related services.
  • Depreciation and amortization expenses increased 339.7% yoy to RMB88.2 million from RMB20.1 million due to the adoption of IFRS 16 and the expanded new PXU facility.
  • Lease and rental expenses decreased 93.5% yoy to RMB3.3 million from RMB51.3 million due to adoption of IFRS 16.
  • Impairment of trade receivables remained at the same level as compared to the prior year period.
  • Other operating expenses increased 114.5% yoy to RMB220.1 million from RMB102.6 million mainly due to transaction costs of RMB133.5 million.

As a result of the above, loss from operations in the fourth quarter of 2019 was RMB163.1 million ($23.4 million) compared to RMB11.8 million in the prior year period. Loss before income taxes in the fourth quarter of 2019 was RMB215.8 million ($31.0 million) compared to income before income taxes of RMB41.3 million in the prior year period. Net loss in the fourth quarter of 2019 was RMB223.2 million ($32.1 million) compared to RMB4.1 million in the prior year period. Increased losses in the fourth quarter of 2019 mainly resulted from transaction related costs of RMB147.5 million and an expanded cost basis partially due to the two new hospitals in Guangzhou and Shanghai Pudong, as well as costs related to the move to the expanded facility for PXU.

Full Year 2019 Results

Revenues were RMB2,449.2 million ($351.8 million) in fiscal 2019, representing an increase of 19.0% yoy from RMB2,058.8 million in fiscal 2018. The increase was primarily driven by growth in both operating assets and expansion assets.

  • Tier 1 Operating Assets: revenue increased by 9.1% yoy to RMB1,810.7 million from RMB1,659.9 million, pro-forma adjusted EBITDA increased by 15.0% to RMB483.1 million, and Adjusted EBITDA (before IFRS 16 adoption) increased by 10.4% yoy to RMB463.8 million from RMB419.9 million, demonstrating stable growth for both outpatient and inpatient volume as well as improved cost efficiency in tier 1 operating assets.
  • Tier 2 Operating and Other Assets: revenue increased by 17.7% yoy to RMB358.8 million from RMB304.9 million, and adjusted EBITDA (before IFRS 16 adoption) increased to RMB(0.2) million from RMB(9.4) million, with tier 2 operating and other assets approaching break-even as a group.
  • Expansion Assets: revenue increased by 187.6% yoy to RMB279.6 million from RMB94.1 million, and adjusted EBITDA (before IFRS 16 adoption) improved to RMB(161.4) million from RMB(185.3) million, achieving significant progress and are on track of the strong ramp up expectation.

Operating expenses were RMB2,647.1 million ($380.2 million) in fiscal 2019, representing an increase of 24.0% yoy from RMB2,135.1 million in fiscal 2018.

  • Salaries, wages and benefits expenses increased 19.1% yoy to RMB1,415.2 million from RMB1,187.7 million. As a percentage of revenues, salaries, wages and benefits expenses were controlled at a stable level (57.8% in 2019 compared to 57.7% in 2018), despite increased service needs as evidenced by the significant revenue growth contributed from the ramping up of new facilities such as PXU, GZU, and PDU.
  • Supplies and purchased medical services expenses increased 31.8% yoy to RMB400.2 million from RMB303.6 million due to expansion of labor, delivery, recovery, postpartum, and vaccination related services.
  • Depreciation and amortization expenses increased 146.6% yoy to RMB341.9 million from RMB138.6 million due to adoption of IFRS 16 and the new, expanded PXU facility.
  • Lease and rental expenses decreased 93.2% yoy to RMB13.7 million from RMB201.7 million due to adoption of IFRS 16.
  • Impairment of trade receivables decreased from RMB16.3 million to RMB7.0 million due to an improved collection rate.
  • Other operating expenses increased 63.4% yoy to RMB469.0 million from RMB287.1 million due to transaction costs of RMB146.0 million. As a percentage of revenues, other operating expenses excluding transaction costs decreased to 13.2% from 13.9% in fiscal 2018.

As a result of the above, loss from operations increased 159.3% yoy to RMB197.9 million ($28.4 million) in fiscal 2019 compared to RMB76.3 million in fiscal 2018. Loss before income taxes in fiscal 2019 was RMB367.6 million ($52.8 million) compared to RMB94.3 million in fiscal 2018. Net loss in fiscal 2019 was RMB430.3 million ($61.8 million) compared to RMB154.0 million in fiscal 2018. Increased losses in the fiscal 2019 mainly resulted from transaction related costs of RMB160.1 million, and an expanded cost basis partially due to the two new hospitals in Guangzhou and Shanghai Pudong, as well as costs related to the move to the expanded Puxi facility.

RECONCILIATON OF NON-IFRS FINANCIAL MEASURES

(RMB mm)

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