KPJ Healthcare Berhad - Annual Report 2018

OUR BUSINESS & STRATEGY OUR PERFORMANCE AND OUTLOOK OUR RESULTS OUR GOVERNANCE APPENDICES ABOUT THIS REPORT 67 KPJ HEALTHCARE BERHAD www.kpjhealth.com.my CHIEF FINANCIAL OFFICER’S REVIEW OUR FINANCIAL PERFORMANCE IN 2018 Revenue Our healthcare operations within Malaysia recorded significant increase in revenue by 4% to RM3.3 billion (2017: RM3.2 billion), mainly contributed by the increase in patient visits, the increase in our number of beds and the number of surgeries performed, particularly within KPJ Rawang, KPJ Pasir Gudang and KPJ Bandar Maharani. Extended promotions of medical tourism offerings to neighbouring countries as well as increased online promotions also contributed to a spike in our revenue. In 2018, we saw KPJ Perlis being added to our network of hosptals within Malaysia, making Malaysian segment accounted for 97% of the Group’s total revenue. On the other hand, our international operations and support services under the Other category underwent a challenging year with flat revenue growth. Stricter national regulations especially in Indonesia resulted to this. Other income Within the category of Other Income, we registered an increase of RM3.1 million or 12%, to RM29.4 million, largely due to gain on fair value of investment properties of RM10.9 million (2017: RM2.3 million). Administrative expenses In line with the increase in activities during the year, administrative expenses have also increased, mainly contributed by depreciation and employee benefits costs. However, management is happy to report that certain expenses within administrative expenses recorded a reduction as compared to the prior year, largely contributed by the effective cost optimisation efforts in FY2018. EBITDA With higher revenue arising from new hospitals within the Group and disciplined cost management effort, we saw our EBITDA increased by 18% to RM503.1 million (2017: RM428.0 million). Taxation The amount of tax paid demonstrates the value of our contribution to the Government and communities at large. Our approach to tax management includes the following: • Respect for the law in each of the jurisdictions in which KPJ operates, complying with the legal obligations for tax, timely filing of tax returns with required disclosures and honoring its tax liabilities diligently. • Conducting intragroup transactions on an arm’s length basis and complying with obligations under transfer pricing rules in the jurisdictions where the Group operates. Transfer pricing reflects the commercial and economic substance of any related- party transactions, using a consistent approach within the Group. • We seek to maintain a long-term, open and constructive relationship with tax authorities and the government. Our tax commitment included corporate income tax, Goods Service Tax (GST), Sales and Service Tax (SST) and withholding taxes. Tax benefits arising from investment tax allowances (ITA) served as an encouragement for expansion and new developments, as well as specific incentives given under the Health Tourism industry, where we worked closely with Malaysian Investment Development Authority (MIDA), Ministry of Health (MOH), Inland Revenue Board (IRB) and Malaysia Healthcare Travel Council (MHTC). OUR FINANCIAL POSITION AS AT 31 DEC 2018 Total assets Total assets grew by 13%, from RM4.2 billion to RM4.8 billion as at 31 December 2018 with higher value of property, plant and equipment (PPE) and cash and cash equivalents by RM224.4 million and RM339.7 million respectively. The increase in PPE was mainly related to additional capital expenditures made on soon-to-be opened hospitals include KPJ BDC in Kuching and KPJ Miri in Miri, as well as a recently-opened hospital, KPJ Bandar Dato’ Onn in Johor Bahru. The newly completed hospital building of KPJ Ampang Puteri also contibuted to the increase in PPE value as at year end. The increase in cash and cash equivalents were contributed by the proceeds received from partial disposal of our shareholdings in a subsidiary, Lablink (M) Sdn Bhd to KL Kappa Sdn Bhd during the year. Total liabilities Total liabilities grew by 10% from RM2.4 billion to RM2.7 billion as at 31 December 2018. The increase was mainly due to RM200 million drawdown of Islamic Medium Term Notes to finance the construction of new hospitals as well as renovation and expansion plans for existing hospitals. KEY HIGHLIGHTS REVENUE 4 % 2018: RM3.3 bil 2017: RM3.2 bil EB I TDA 18 % 2018: RM503.1 mil 2017: RM428.0 mil GROSS PROFIT 6 % 2018: RM1,018.8 mil 2017: RM965.3 mil PAT 12 % 2018: RM186.2 mil 2017: RM166.9 mil