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Raffles Medical Group’s 2023 Net Profit Tumbles 37% Year on Year: 5 Highlights from the Integrated Healthcare Player’s Latest Earnings

Raffles Hospital
Raffles Hospital

Raffles Medical Group (SGX: BSL), or RMG, is next on the list to release its 2023 earnings.

The integrated healthcare player delivered a downbeat set of earnings as revenue from COVID-19 procedures and tests tapered off.

The group’s new insurance arm also acted as a drag on the group’s net profit.

Despite the weaker numbers, there were several bright spots for RMG with patient numbers rising and its China hospitals being recognised for their excellence.

Here are five highlights from RMG’s latest financial statements that investors should know about.

1. Weaker net profit offset by steady free cash flow generation

Revenue for 2023 fell by 14.1% year on year to S$706.9 million as revenue for the Healthcare Services division fell sharply because of the cessation of COVID-19 activities.

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Higher insurance expenses pushed RMG’s operating profit down nearly 41% year on year to S$115.8 million.

Aided by a year-on-year increase in finance income, the healthcare player’s net profit tumbled by 37.1% year on year to S$90.2 million.

RMG’s balance sheet remained robust with S$343.6 million of cash along with S$70.6 million of loans.

Despite the sharp fall in net profit, the group’s free cash flow generation remained robust.

2023 saw a positive free cash flow of S$167.4 million, just 2.1% lower than the free cash flow of S$170.9 million churned out in 2022.

2. Addressing evolving patient needs in Singapore

RMG continued to see steady growth in the number of patients with patients’ needs also evolving.

Its Healthcare Services revenue fell by 36.3% year on year to S$283.4 million due to the aforementioned cessation of COVID-19-related revenue.

Segment profit before tax (PBT) plunged by 59.4% year on year to S$67.3 million.

Segment margin declined from 37.2% to 23.8%.

RMG will take in more specialists, physicians, and nurses to offer a wider range of healthcare services across its operations while fine-tuning its capacity management strategies.

In particular, the group is looking to enhance its teleconsultation platform to handle patient growth and deliver a better experience.

RMG is also working with Singapore’s Ministry of Health to operate transitional care facilities with 176 additional beds dedicated to this programme.

These additions will help to improve the scale of the operation.

3. Gestational losses for China hospitals

RMG’s Hospitals division performed better.

Segment revenue increased by 4.5% year on year to S$330.6 million.

Segment PBT shot up 52.2% year on year to S$32.6 million, giving the division a PBT margin of 9.9%, up from 6.8% a year back.

RMG’s Chongqing and Shanghai hospitals are seeing growing patient numbers but are still in their development phase.

Therefore, both continued to incur gestational losses.

The healthcare group plans to consolidate its three existing hospitals in China.

Management warned of a possible economic slowdown but believes that high-end healthcare demand should continue to grow in the region.

To this end, RMG entered a strategic partnership to manage the American International Hospital (AIH) in Ho Chi Minh City, Vietnam.

4. Higher loss ratio for its insurance division

RMG’s health insurance arm, Raffles Health Insurance (RHI), saw revenue increase by 25.6% year on year to S$144.5 million.

However, the division incurred a loss before tax of S$7 million compared to a small profit of S$531,000 last year because of a higher loss ratio.

The loss ratio is defined as the losses an insurer incurs from paying out claims as a proportion of the premiums it earns.

5. A reduction in the final dividend

In line with the weaker results for 2023, RMG slashed its final dividend from S$0.038 last year to S$0.024.

The healthcare player’s shares offer a 2.3% dividend yield based on the share price of S$1.05 as of 23 February 2024.

Get Smart: A sanguine outlook for 2024

Loo Choon Yong, Executive Chairman of RMG, offered a sanguine outlook for this year.

He acknowledged that there were geopolitical and macroeconomic headwinds but believes that there is a growing demand for quality healthcare in Singapore and the region.

RMG is in a good position to deliver this level of service as it can provide seamless care as a team.

The group expects to remain profitable for 2024.

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Disclosure: Royston Yang owns shares of Raffles Medical Group.

The post Raffles Medical Group’s 2023 Net Profit Tumbles 37% Year on Year: 5 Highlights from the Integrated Healthcare Player’s Latest Earnings appeared first on The Smart Investor.