Raffles Medical Group Ltd’s Latest Earnings: What Investors Should Know

Raffles Medical Group Ltd  (SGX: R01) reported its full-year earnings for 2015 earlier this morning.

The healthcare services provider has two major divisions: Healthcare Services and Hospital Services. The first houses Raffles Medical’s medical clinics, health insurance, and consultancy services. The second includes the company’s specialist medical services and its namesake hospital, Raffles Hospital.

You can catch the results from the company’s previous earnings here.

Financial highlights

The following’s a quick summary of the latest figures from Raffles Medical:

  1. For 2015, revenue rose by 9.6% to $410.5 million.
  2. Net profit attributable to shareholders, though, inched up only 2.4% to $69.3 million compared to the $67.6 million seen in 2014.
  3. For the full year, earnings per share (EPS) was relatively flat, coming in at 12.03 cents. This compares with the EPS of 11.96 cents recorded in the prior year.
  4. Cash flow from operations was a solid $72.8 million with capital expenditures coming in at $34.7 million. The low capex gave the healthcare provider $38.1 million in positive free cash flow. This was lower than the $75.8 million in free cash flow ($93.5 million in cash flow from operations and $17.7 million in capex) recorded last year though.
  5. As of 31 December 2015, Raffles Medical had $86.1 million in cash and equivalents and $32.3 million in debt. This is a decrease from its cash and equivalents of $150.2 million and debt of $6.4 million recorded at the end of 2014.

In summary, Raffles Medical’s top-line rose, but its profit and earnings per share had lagged. This was due to higher staff costs, which increased by 11.8%. But, the higher expenses may be for a good reason: There was recruitment of more staff for new and expanded operations as well as additional staff costs from new subsidiaries.

The healthcare operator’s free cash flow and balance sheet remained healthy, despite having registered declines when compared to 2014. The lower cash position on its balance sheet was due to payments made for investment properties under development ($115.3 million) and the acquisition of a majority equity interest in healthcare services provider International SOS ($29.7 million). In other words, Raffles Medical had been investing for its future.

The company’s board of directors had recommended a final dividend of 4.5 cents per share. Together with the interim dividend of 1.5 cents per share, 2015’s full-year dividend will be 6 cents per share, an improvement of 9.1% compared to the previous year (5.5 cents per share in dividend).

In a separate announcement, Raffles Medical is also proposing to split its shares one for three to make its shares. As of today, the company has 575.25 million shares outstanding.

Operational highlights

For the full year, revenue from the Healthcare Services and Hospital Services divisions grew by 14.6% and 7% respectively. The Healthcare Services division benefited from the sales contribution from the newly acquired International SOS (MC Holdings). Meanwhile, the Hospital Services division grew on the back of “more specialist consultants, increased patient load and greater patient acuity.”

The management team had the following commentary to add for the coming year:

“The slower economic growth in Singapore and the region may have a dampening effect on healthcare demand in general. However, the Group has positioned well for the future with the planned completion of the Raffles Holland V [Village] and RafflesHospital Extension projects as well as the expansion to other regional markets in cities where there is strong demand for good reliable healthcare. The Group will continue to be vigilant and to proactively respond to new opportunities and challenges that may arise.

Based on the current economic outlook and barring unforeseen circumstances, the Directors expect the Group to continue to grow in 2016. ”

Looking forward, Raffles Medical is in the midst of expanding its flagship hospital and is developing a new medical/retail facility at Holland Village in Singapore. The expansion of Raffles Hospital had commenced in December 2014 and is expected to be completed in the first-half of 2017. Meanwhile, the new Raffles Holland Village building is on track to be completed in the first-quarter of 2016. Elsewhere, the foundation stone was laid for Raffles Hospital Shanghai on November 2015.

Foolish takeaway

At its opening price today of $4.16, Raffles Medical Group traded at around 34.6 times trailing earnings with a dividend yield of 1.4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Raffles Medical Group