ЕМС announces 2021 IFRS financial results

EMC returns some of the highest margins among public healthcare companies globally

Nicosia, Cyprus, 26 April 2022. United Medical Group CY PLC (hereafter the “company”, and together with its subsidiaries the “group” or “EMC”; Moscow Exchange ticker GEMC), a leading multidisciplinary provider of premium healthcare services in Russia operating under the European Medical Center brand, has announced its IFRS financial results for the year, ended 31 December 2021 (FY 2021).

KEY FY 2021 FINANCIALS RESULTS

• In 2021, adjusted revenue amounted to EUR 288.8 mln (an increase of 19.7% y/y), which reflects the growth in sales of premium quality medical services under the influence of the trend towards the development of preventive medicine and health care.
• Adjusted consolidated revenue of the Group in rubles amounted to RUB 25,105.4 million (an increase of 26.3% y/y), additional support was provided by the growth of the euro exchange rate.
• Operating expenses amounted to EUR 173 million (an increase of 8.7% y/y), which is significantly lower than the revenue growth rate. The largest increase was demonstrated by the costs of medicines and patient care, which is due to a significant increase in the number of chemotherapy procedures performed under mandatory health insurance (MHI) programs.
• Operating profit reached EUR 91.1 million (an increase of 11.8% y/y), due to revenue growth and the effect of the increase in non-recurring administrative expenses: 1) "non-recurring expenses", including expenses for revenue development consulting projects, 2) reserves on financial assets, including loans for projects that were stopped due to the current economic situation, 3) customs penalty for the supply of medical equipment in 2018.
• Adjusted EBITDA amounted to EUR 116.2 million (an increase of 19.4% y/y). Adjusted EBITDA margin was 40.2%, which corresponds to the level of 2020 and is one of the highest among public healthcare companies globally.
• The Company's net profit amounted to EUR 68.0 million euros (a decrease of 15.6% y/y), due to non-recurring expenses from the category of general and administrative expenses (G&A) related to consulting and write-offs related to previous periods. In addition to non-recurring expenses, the net profit was affected by the revaluation of forward contracts for hedging foreign currency liabilities, an increase in financial expenses, foreign exchange differences, property tax and tax on intra-group dividends.
• The Company's capex amounted to EUR 16.2 million (a decrease of 55.0% y/y), as the company passed the peak of its investment cycle and frees up additional cash flow for shareholders.
• EMC's net debt as of December 31, 2021 was EUR 172.0 million compared to EUR 137.7 million as of December 31, 2020. Due to the growth of EBITDA, the debt burden as a whole remained at the level of 2020. The net debt/EBITDA was 1.48x versus 1.42x a year earlier.

KEY FY 2021 OPERATING RESULTS

• The number of outpatient clinic visits amounted to 590,759 (an increase of 12.7% y/y), due to the growth in the areas of therapy, emergency care, physiotherapy, ophthalmology, psychiatric help, and radiotherapy.
• The average purchase amount for outpatient services amounted to EUR 262 (a decrease of 0.4% y/y), stable level supported by an increase in the average check in the areas of radionuclide diagnostics, neurosurgery, and emergency care.
• The number of hospital admissions amounted to 24,843 (an increase of 82.8% y/y), primarily in the areas of oncology (chemotherapy) and radiotherapy, as well as new services in the areas of radionuclide diagnostics and therapy. The first two directions showed a more than three- and two-fold increase in hospitalizations, respectively.
• Excluding day clinic (where chemotherapy services are mainly provided) the number of hospital admissions amounted to 9,229 (an increase of 5.5% y/y). The growth is in the specializations of orthopedics, traumatology, rehabilitation, ophthalmology and plastic surgery.
• The average check for hospital services amounted to EUR 4,908 (a decrease of 25.9% y/y). The dynamics of the average check is due to the increased share of chemotherapy procedures which have a lower average check compared to more complex and high-tech treatment. This dynamics were fully offset by a sharp increase in the number of hospital admissions, as well as an overall increase in the turnover of beds and a significant reduction in the average time of stay.

• Excluding day clinic (where chemotherapy services are mainly provided) the number of hospital admissions amounted to 9,229 (an increase of 5.5% y/y).
• The average check for hospital services, excluding day clinic, amounted to EUR 7,664 (an increase of 10.2% y/y).

EMC CEO Andrey Yanovsky commented:

"This is the first time we publish full-year financial statements as a public company, which certainly imposes additional responsibility. I would like to note that by the end of 2021, the Company has demonstrated high growth rates and profitability again, while we managed to follow our long-term strategy to create a unified center of medical expertise, and the growth in the number of customers is the best confirmation of our commitment to the highest quality of service, based on modern technologies and knowledge.

We managed to increase euro nominated revenue by 20%, which is significantly higher than the growth of the private medical services market as a whole. At the same time, we maintain high diversification and continue to provide services in more than 50 medical specializations. The largest share as a percentage of revenue excluding services provided under the MHI is our oncology practice - 18%.

Cost control, increased efficiency and the introduction of new digital technologies have allowed us to maintain a level of profitability, while increasing operational results and business scale. The adjusted EBITDA growth has exceeded 19% y/y. Adjusted EBITDA margin has remained above 40%, which is one of the highest among public healthcare companies globally.

Our team continues to expand. I would like to note that EMC remains the preferred employer for medical specialists, which means it retains the opportunity to attract the best. EMC School continues its educational activities and holds conferences to exchange expertise and discuss the modern methods of treatment, which allows employees to constantly improve their qualifications, and young professionals to receive sought-after medical specialties. Over the past year, our team of doctors has grown by more than 6%, while the staff turnover rate remains at a level close to zero.

The existing portfolio of assets allowed us to develop and maintain high growth rates without significant investments in the construction and opening of new clinics. We have used the released cash flow to distribute profits among our shareholders, paying investors 114.4 million euros for 2020 and the first half of 2021, which is fully in line with the plans that we announced during the IPO.

The development of EMC will continue to rely on the existing modern and high-tech clinics to limit the risks associated with new investments in a difficult economic situation. We have significantly increased our medicines inventories, we continue to procure medical equipment and will focus our efforts on regular business - the provision of planned medical care.

I thank our team, customers and partners, shareholders and investors for their loyalty, support and well-coordinated interaction. We intend to continue progressive development, meeting the expectations of all the company's stakeholders.”

1. Adjusted revenue does not include construction revenue;
2. Adjusted revenue and adjusted EBITDA were converted into rubles at the average EUR/RUB exchange rates of 82.4 and 86.9 for 2020 and 2021, respectively;
3. Adjusted EBITDA does not include construction revenue and construction costs, non-recurring administrative expenses: 1) article "non-recurring expenses", including expenses for revenue development consulting projects, 2) reserves on of financial assets, including loans for projects that were stopped due to the current economic situation, 3) customs penalty for the supply of medical equipment in 2018