Fortis Healthcare reports Q3 FY21 Consolidated Financial Results

Fortis Healthcare Ltd. ("Fortis" or the "Company"), India's leading healthcare delivery company, today announced its un-audited consolidated financial results for the quarter and nine-month period ended December 31, 2020.

Consolidated Financials

- Q3FY21 Hospital Business revenues at INR 906.8 Crs versus INR 953.5 Crs in Q3FY20. As compared to Q2FY21 revenues grew 21.5%.

- The hospital business EBITDA was at INR 138.7 Crs versus INR 133.8 Crs in Q3FY20 (15.3% margin versus 14.0%). EBITDA increased 64% compared to Q2FY21.

* Excluding the impact of the Arcot Road, Chennai hospital commissioned in October 2020, EBITDA was at INR 146.2 Crs (16.2% margin)

- Q3 FY21 Diagnostics Business gross revenues increased 22.8% to INR 306.2 Crs, (the highest ever quarterly revenues for SRL) versus INR 249.4 Crs in Q3FY20. As compared to Q2FY21 revenues grew 8.4%.

- The diagnostics business EBITDA increased 83.3% to INR 73.0 Crs (the highest ever quarterly EBITDA for SRL) versus INR 39.8 Crs in Q3FY20. The EBITDA for Q2FY21 stood at INR 70.5 Crs.

The Board of Directors of the Company, today also approved the acquisition of the balance 50% stake in DDRC SRL Diagnostics Private Limited (DDRC-SRL) by SRL Limited. DDRCSRL is an existing 50:50 JV in Kerala between the DDRC group and SRL Diagnostics Private Limited (a wholly owned subsidiary of SRL Limited). Consummation of the transaction will be subject to the Company's shareholders approval and other regulatory approvals as required.

Hospital Business

The quarter has witnessed a robust performance in both the hospitals and the diagnostics business segments. The pandemic has receded significantly over the past few months allowing for an accelerated recovery and pick up in business momentum. The hospital business occupancy saw a steady improvement with encouraging signs of increase in non-covid occupancy versus the trailing quarter. While overall occupancy improved to 64% (57% in Q2FY20), Non-Covid occupancy was at 46% in Q3 versus 38% in Q2. Patients returning for elective surgery treatments have seen surgical volumes grow reflecting further normalization in the business environment and an improved product mix. With further economic relaxations and the vaccination program gaining momentum, international travel restrictions have eased resulting in increasing business from the medical tourism segment. Given the improving environment, the company is well positioned to augment its resources for further growth and expansion. However, it continues to be cautiously optimistic with the pandemic in select countries seeing signs of different strains of the virus and resulting in lockdowns.

Diagnostics Business

The diagnostics business has seen a robust improvement in performance and recorded its highest ever quarterly revenues and EBITDA. For the quarter, non-covid revenues were at 93.5% of the pre-covid levels. The covid contribution to revenues has also seen a decline from 28% in Q2FY21 to 24% in Q3FY21. Covid test volumes i.e. RT-PCR tests for the quarter were 8.38 lakh versus 5.17 lakh (including JVs) in Q2FY21. The business continues to focus on improving the B2C:B2B revenue mix and executing on its channel and product strategy in order to further accelerate business momentum.

The Company has a comfortable liquidity position with net debt to equity of 0.15x as on December 31, 2020 and is re-initiating its growth and expansion plans with judicious capital commitments. At the same time, with business expected to return to full normalization going forward the Company is also evaluating further cost optimization measures across the network.

Balance 50% acquisition in the existing DDRC-SRL JV

SRL's acquisition of the balance 50% stake in the DDRC-SRL JV would be for a total purchase consideration of INR 350 Crs inclusive of the ownership of the DDRC brand. The JV has a string of diagnostic laboratories in the state of Kerala and commands the majority market share in the organised diagnostics segment in the state. The JV recorded revenues of INR 160 Crs in FY20. The proposed acquisition provides SRL Limited an opportunity to consolidate its leadership position in Kerala. It further complements its strategy of growing the B2C business segment and expanding the product portfolio comprising lifestyle diseases tests, specialized tests and preventive packages. Post the consummation of the transaction, the JV would be entirely consolidated with SRL which is currently being shown as Share in associate for SRL's existing 50% stake.

FINANCIAL HIGHLIGHTS

- The company has a comfortable leverage position with net debt (excluding lease liabilities) at INR 1,041 Crs as of December 31, 2020 versus INR 1,113 Crs as of September 30, 2020

- Finance costs in the quarter witnessed a decline of 12% to INR 42.1 Crs primarily as a result of reduction in borrowing costs

- For YTD Nine months ended 31 Dec 2020, the Company recorded consolidated revenues of INR 2,777.7 Crs compared to INR 3,519.4 Crs in the corresponding previous period. EBITDA stood at INR 247.3 Crs versus INR 518 Crs in the corresponding previous period while Profit after Tax (PAT) was at a loss of INR 118.6 Crs as compared to a profit INR 132.7 Crs for YTD Nine months ended 31 Dec 2019.

- Average revenue per occupied bed (ARPOB) for the quarter stood at INR 1.58 Crs versus INR 1.62 Crs in Q3FY20. Average length of stay (ALOS) was at 3.81 days versus 3.24 days in the corresponding previous period

- The Company commissioned a 250 bed multi-specialty facility at Arcot Road, Chennai in October 2020. This is the Company's second facility in Chennai comprising state of the art medical infrastructure and offering high-end quaternary care services.

- The Company's revenues from medical tourism contributed 5.0% to total revenues as compared to 1.3% in Q2FY21 and 10.7% in Q3FY20.

DIAGNOSTICS BUSINESS

- SRL conducted 6.67 million tests in the quarter versus 7.45 Mn in the corresponding previous period and versus 5.92 million in Q2 FY21.

- The Company increased its contribution from the B2C segment with approx. 46% revenue contribution as compared to 42% in the corresponding previous quarter.

- The Company expanded its covid testing across 15 laboratories. Covid test volumes i.e. RT-PCR tests continue to see a significant increase with the Company having conducted a total of 8.38 lakhs tests in the quarter as compared to 5.17 lakhs conducted in Q2 FY21 (including JVs).

Ravi Rajagopal, Chairman, Board of Directors, Fortis Healthcare stated, "The Company's Q3 results have shown a robust earnings performance with margins in the both businesses witnessing a healthy improvement. With the appreciable efforts of our medical workforce, we have and would continue to be at the forefront of the battle against the pandemic as long as its required. At the same time, we believe the time is apt for us to re-initiate investments in the business whether it be in increasing bed capacity or expanding medical programs. We would focus on further strengthening our talent base and enhancing our efforts towards digitization across the network. Our growth imperative also encapsulates inorganic efforts as reflected in SRL's announcement of the acquisition of the 50% stake in the DDRC - SRL JV. This we believe will further complement SRL's existing strategy and also provide it a platform for expanding its presence in other markets in South India. As we approach the next fiscal we remain optimistic that both our businesses would exhibit a progressively better performance and add value for all our stakeholders."

Commenting on the quarter results, Dr Ashutosh Raghuvanshi, MD and CEO, Fortis Healthcare stated, "The quarter's performance has re-iterated our belief that we are progressing towards normalization by the start of the next fiscal. Both the businesses have witnessed an uptick in their performance led by the recovery in non-covid business metrics. Our OPD consults are approaching pre-covid levels and the medical tourism segment is also seeing signs of a rebound. As restrictions are further eased and the vaccination drive gathers momentum, we expect further traction in our surgical and testing volumes in the hospital and diagnostics business respectively. Both businesses are well placed for future growth and expansion. SRL's acquisition of the balance stake in DDRC-SRL consolidates it leadership in Kerala and fits well into SRL's overall strategy. While we are taking the necessary steps to augment our bed capacities in select facilities, we are also strengthening our medical talent by onboarding eminent clinicians who have joined our network in specialties of cardiology and urology. All in all, this has been a positive quarter on many counts and we expect the momentum to sustain. The challenges of the past few quarters have made us more resilient and flexible in adapting to the changing needs of the business and the overall environment."

Shares of FORTIS HEALTHCARE LTD. was last trading in BSE at Rs.167.4 as compared to the previous close of Rs. 171.3. The total number of shares traded during the day was 178005 in over 1976 trades.

The stock hit an intraday high of Rs. 173.9 and intraday low of 164.1. The net turnover during the day was Rs. 30150423.

Source : Equity Bulls

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