KPJ Healthcare Berhad - Annual Report 2018

68 KPJ HEALTHCARE BERHAD Cash flows We closed the year with a healthy cash and cash equivalent balance of RM404.2 million, an increase of more than 100% from FY2017 with key outflow in tandem with investment on development of existing and new hospital buildings. Cash flow from operations stood at RM629.1 million (2017: RM432.7 million) which we saw debtors and stocks turnover days improved from previous year by 8 days and 0.5 day respectively. Cash used for investment activities was RM453.9 million (2017: RM419.4 million), an increase of 8% largely being utilised for capital expenditures of the hospital operation in Malaysia. The cash investment is testament of our continuous efforts to sustain our existing and growing revenue streams. Cash generated from financing activities was RM140.8 million, as compared to cash utilised in 2017 of RM98.6 million, of which RM63.1 million (2017: RM90.4 million) was utilised to pay dividends to shareholders, RM91.1 million (2017: RM82.3 million) for the repayment of finance cost in relation to bank borrowings and RM128.3 million (2017: RM50.4 million) was net inflow from bank borrowings to finance expansion projects. In 2018, cash generated from the ESOS scheme and conversion of warrant raised a total of RM115.0 million (2017: RM24.8 million). CAPITAL MANAGEMENT The Group defines capital as total shareholders’ fund and borrowings. The objective of the Group’s capital management is to maintain strong credit ratings and healthy capital ratios in order to support our business, maximise shareholder’s value and comply with our financial covenants. We also remain vigilant in keeping our strong financial indicators, and maintaining our debt ratios within the headroom guidance of 0.82x Total Borrowings/Total Shareholders’ Fund to preserve KPJ’s investment-grade credit standing, as well as capacity to fund our expansion either through existing unutilised financing facilities or with new borrowings, if any. With our sound financial position, we are in good stead to navigate the business through any opportunities and challenges that 2019 may bring, and beyond. DIVESTMENT OF AGED CARE OPERATIONS IN AUSTRALIA Following a strategic review of the business model, the Board of Directors, during the year 2017, had approved for the divestment of aged care operations in Australia by disposing its shares in Jeta Gardens (Qld) Pty Ltd (Jeta Gardens). The results of Jeta Gardens was disclosed as a discontinued operation and the relevant assets and liabilities were classified as being held for sale. The negotiations with potential buyer are still undergoing, and the transactions are expected to be completed this year. RETURNS TO SHAREHOLDERS The Group’s practice is to pay a progressive dividend that takes into account underlying earnings and available funding, while retaining sufficient capital to fund operations and ongoing projects, as well as manage gearing at acceptable levels. We endeavour to achieve a good balance at all times between cash requirements for our business and dividend payout to shareholders. Due consideration is also given to ensure our dividend payout ratio is within benchmark of our industry peers and sustaining dividend payments for the future. Dividends will be paid only if approved by the Board out of funds available for such distribution. The actual amount and timing of the payments will depend upon our level of cash balances, retained earnings and other expected obligations as our Board deems appropriate. The Group has been consistently dedicated in rewarding our shareholders with quarterly dividend payout of between 45% to 50% of net profit. For 2018, the Company declared dividends of 2.0 sen per ordinary share. GOING FORWARD As we move into the new financial year, we will continue to scrutinise our operational and financial performance, to sustain a high standard of delivery to all our stakeholders. We are committed to making the best use of the resources available to our Group to deliver quality healthcare services and sustain our leadership as the preferred healthcare provider. Norhaizam Mohammad Vice President (II) Group Finance Services CHIEF FINANCIAL OFFICER’S REVIEW KEY HIGHLIGHTS Total assets Total liabilities Cash flows Cash flows Cash flows + 13 % + 10 % + 45 % + 8 % > 100 % The Group’s total assets grew by KPJ’s total liabilities grew by Cash flow from operations grew by Cash used for investment activities Cash generated from financing activities 2018: RM4.8 billion 2017: RM4.2 billion 2018: RM2.7 billion 2017: RM2.4 billion 2018: RM629.1 million 2017: RM432.7 million 2018: RM453.9 million 2017: RM419.4 million 2018: RM140.8 million 2017: (RM98.6) million