Georgia Healthcare Group PLC Announces 3rd Quarter Results

Third quarter and Nine-Month 2019 Results

LONDON, UK / ACCESSWIRE / November 13, 2019 / GHG announces today the Group’s 3Q19 and 9M19 consolidated results, reporting 13.0% y-o-y growth in nine-month revenues to GEL 703.3 million (US$238.0 million/GBP 193.7 million) and a 50 basis point improvement in adjusted ROIC2. The Group posted nine-month profit of GEL 46.0 million (US$15.6 million/GBP 12.7 million) and adjusted earnings per share1 (“EPS“) of GEL 0.27 (US$0.09 per share/GBP 0.07 per share), both excluding IFRS 16 lease accounting impact.

In order to permit meaningful comparisons between reporting periods, in the table below Net Profit, EBITDA, EBITDA margin and EPS data, for GHG as well as for each segment, exclude IFRS 16 financial impact. For the same reason, the discussions throughout this report of 2019 quarterly and nine-month results for the Group and each business line also focus on the numbers excluding the IFRS 16 impact. Each financial table, on the other hand, shows both – the results with and without IFRS 16 impact. We are adopting this convention for 2019 only because 2018 figures have not been restated on an IFRS 16 basis.

GEL million; unless otherwise noted
    3Q19       3Q18    
      9M19       9M18    
The Group
Revenue, gross
    230.5       202.9       13.6 %     703.3       622.4       13.0 %
EBITDA excluding IFRS 16
    36.6       32.7       11.9 %     111.4       95.4       16.8 %
Net Profit excluding IFRS 16
    14.7       9.7       52.6 %     46.0       38.0       21.0 %
EPS adjusted1, GEL excluding IFRS 16
    0.08       0.07       23.8 %     0.27       0.21       29.7 %
ROIC adjusted2(%)
    14.2 %     14.0 %   0.2ppts       14.3 %     13.8 %   0.5ppts  
Hospitals business
Revenue, gross
    68.7       64.1       7.1 %     217.7       196.2       10.9 %
EBITDA excluding IFRS 16
    16.8       16.4       2.6 %     54.8       50.9       7.7 %
EBITDA margin (%) excluding IFRS 16
    24.5 %     25.6 %   -1.1ppts       25.2 %     26.0 %   -0.8ppts  
Net Profit excluding IFRS 16
    3.1       3.4       -7.6 %     13.2       13.8       -4.9 %
Clinics business
Revenue, gross
    10.6       8.9       18.6 %     32.5       28.3       15.0 %
EBITDA excluding IFRS 16
    1.8       1.2       46.3 %     5.8       4.0       45.3 %
EBITDA margin (%) excluding IFRS 16
    16.9 %     13.7 %   3.2ppts       17.7 %     14.0 %   3.7ppts  
Net Profit excluding IFRS 16
    (0.7 )     (1.0 )     -37.4 %     (1.2 )     (2.6 )     -52.2 %
Pharmacy and distribution business
    146.8       123.3       19.0 %     442.0       377.5       17.1 %
Gross profit margin (%)
    25.7 %     26.1 %   -0.4ppts       25.3 %     25.1 %   0.2ppts  
EBITDA excluding IFRS 16
    15.2       12.4       22.5 %     46.1       37.0       24.7 %
EBITDA margin (%) excluding IFRS 16
    10.4 %     10.1 %   0.3ppts       10.4 %     9.8 %   0.6ppts  
Net Profit excluding IFRS 16
    10.0       5.2       91.4 %     30.4       24.5       24.1 %
Medical insurance business
Net insurance premiums earned
    19.4       14.2       36.5 %     55.8       41.2       35.3 %
Loss ratio (%)
    73.4 %     64.8 %   8.6ppts       80.2 %     77.0 %   3.2ppts  
Combined ratio (%) excluding IFRS 16
    86.7 %     82.4 %   4.3ppts       92.8 %     93.1 %   -0.3ppts  
EBITDA excluding IFRS 16
    2.8       2.7       3.4 %     4.6       3.4       34.1 %
Net Profit/ (Loss) excluding IFRS 16
    2.4       2.2       7.2 %     3.9       2.5       57.5 %
    1.1       0.7       66.2 %     3.4       2.1       66.0 %
Gross profit margin (%)
    30.6 %     21.2 %   9.4ppts       30.0 %     21.6 %   8.4ppts  
EBITDA excluding IFRS 16
    0.0       0.0     NMF       0.1       0.1       51.3 %
EBITDA margin (%) excluding IFRS 16
    1.6 %     0.1 %   NMF       3.4 %     3.7 %   NMF  
Net Profit/ (Loss) excluding IFRS 16
    (0.1 )     (0.1 )   NMF       (0.2 )     (0.2 )   NMF  

1 Adjusted for non-recurring items and foreign currency losses

2 Return on invested capital (“ROIC”) adjusted to exclude newly launched hospitals and polyclinics that are in roll-out phase


During the first nine months of 2019, the Group maintained focus on our key strategic objectives and made solid progress in delivering earnings momentum, improved cash generation and return on capital invested. The recent completion of our major three-year capital expenditure programme has reduced investment requirements and allowed us to stabilise debt levels. The result is growth in net profit and EPS which now significantly exceed the double-digit growth in our revenue and EBITDA.

Going forward, as we continue to make progress in delivering the strategy of each of our businesses and leveraging the strength of our franchise, we expect to continue to grow our revenue by double-digits without significant further capital spending. As we announced at our recent Investor Day in June, the Group will continue to build out a number of profitable new growth opportunities. These include developing medical tourism, creating new retail laboratory diagnostic services, expanding the outpatient clinics and dental services, and adding new pharmacies and new products such as private label personal care products. These initiatives, together with the continued organic development we expect in our core operations, position us well to grow the business over the medium-term at good returns on capital, increase operating cash flows and further reduce debt.

As explained elsewhere, for comparison purposes, my comments here are on the results excluding the impact of IFRS 16.

The Group. In the first nine months of 2019, the Group gross revenues totalled GEL 703 million, up by 13% on the back of double-digit revenue growth in each of our businesses. EBITDA of GEL 111 million represented a 17% increase year on year, and net profit increased by 21% over the same period, to GEL 46 million. Having largely completed the Group’s significant three-year investment programme, we are now seeing the benefits being translated into even stronger net profit and earnings per share growth, with the latter being up 23% y-o-y. Our return on invested capital, adjusted to exclude the roll-out effect of new hospitals and polyclinics, has also increased, from 13.8% to 14.3%, over the last twelve months.

Performance was good across all five of our business segments. Our pharmacy and distribution business performed particularly well with 17% revenue growth (12% growth net of the newly added centralised procurement entity) and an EBITDA margin in excess of 10%. Our clinics business posted 45% EBITDA growth. Results in the hospitals business are consistently improving as we continue to roll-out our two new flagship hospitals. The medical insurance business delivered robust revenue growth and a significant improvement in the combined ratio leading to a pre-tax income of GEL 4.6 million in the first nine months of the year, an increase of 59%.

In the seasonally quiet third quarter revenues increased by 14% to GEL 230 million. The stabilised depreciation and lower interest expense that have resulted from the completion of our major capital expenditure programme meant that the 12% EBITDA growth translated into 53% increase in net profit and EPS.

With inflation in Georgia above its target rate, National Bank of Georgia (“NBG”) tightened the monetary policy and increased the refinancing rate by a total of 200 bps in September and October 2019. This will affect the Group’s interest expense going forward, as 75% of GHG borrowings carry a floating interest rate. Our group-wide exercise to reduce borrowing costs will partly offset this. Most notably, the hospitals segment re-financed existing more expensive debt by issuing GEL 50 million local currency denominated bonds, with the lowest ever margin (310 bps above the base rate) of any corporation in Georgia.

Hospitals business. In the first nine months, our hospitals business revenues grew 11% to GEL 218 million. EBITDA increased 8% y-o-y to GEL 55 million and the EBITDA margin was 25.2%, despite our two new flagship hospitals being in their roll-out phase and the cost impact of the new Georgian pension system introduced in 2019 (explained in more details on page 9) and which mostly affected our hospitals business as a service provider. Excluding the roll-out impact of our two new flagship hospitals, the EBITDA margin was 27.9%. The revenue growth was supported by the strong growth in our two newly launched hospitals, particularly at Regional Hospital, which has now been rebranded as Caucasus Medical Center (“CMC”). In the first nine months, both of these new flagship hospitals delivered double-digit EBITDA margin, with occupancy rates of 35.8% for CMC and 46.5% for Tbilisi Referral Hospital. The business is also making progress on its medical tourism strategy. Active marketing campaigns and other development initiatives implemented in our target country markets led to drove a 37% y-o-y increase in the number of international patients, which led to 9M19 revenue of a GEL 3.5 million (up 43% y-o-y) from medical tourism.

Clinics business. Our polyclinic network continues to grow, and the Evex polyclinics clearly stand out from the competition as new, modern facilities that provide a diverse range of high-quality services in one location. The number of registered patients in Tbilisi has grown to c.183,000 (up 57,000 y-o-y). Revenues in the first nine months increased by 15%, with polyclinics growing at 22% and community clinics at 10%. The EBITDA margin increased from 14.0% to 17.7% over the same period. We will continue to pursue our polyclinics strategy of increasing the client base, supported by the further roll-out of dental clinics, which will allow us to consolidate our position as the largest competitor in this highly fragmented market.

Pharmacy and Distribution business. Our pharmacy chain and distribution business delivered record revenues in 9M19 of GEL 442 million, up 17% y-o-y. The business posted 12% organic revenue growth, supported by double-digit organic growth in both the retail and distribution businesses. The balance of the overall revenue growth was contributed by our centralised medicine procurement entity, which was transferred to the GHG pharmacy and distribution business in 2019. Our gross profit margin increase was mainly driven by the scale benefit and increased sales of personal care and beauty products. We have also introduced private label para-pharmacy products under the brand name “Attirance”, which within the five months of product launch posted GEL 0.5 million revenue. The business achieved operating leverage of 4.4 ppts which supported 25% growth in EBITDA and an EBITDA margin that continues to exceed expectations, increasing by 60 basis points year-on-year to 10.4%. This is an extremely strong performance and substantially above our targeted “more than 9%” margin.

In October 2019, we signed a franchise agreement with The Body Shop a leading British cosmetics, skin care and perfume company. The pharmacy and distribution business will operate The Body Shop in Georgia for an initial term of 10 years. In the first year of operations we will develop up to three standalone flagship The Body Shop stores in the capital and large cities, and will also operate a shop in shop model, developing The Body Shop stands in our high-end retail pharmacy chain – GPC. The business is planning to operate the shop in shop model in c.50 GPC pharmacies, gradually increasing the number to c.100 over the next few years. Adding The Body Shop brand in the portfolio will upgrade the business’ range of personal care products and further contribute to its growth.

Medical insurance business. Our medical insurance business has made substantial progress over the last 12 months to increase its client base and is now contributing to the profitability of the Group. Net insurance premiums earned increased by 35% in the first nine months of the year, supported by the addition of a large state client in the first quarter. The combined ratio improved by 30 basis points to 92.8%, translating into 34% EBITDA and 58% net profit growth of the business. More importantly, we continue to improve the level of medical insurance claims retained within the Group and, in the first nine months of 2019, 42% of medical expense claims were retained within the Group and 43% in the third quarter. We expect this ratio to continue to improve over the next few years.

Diagnostics business. In December 2018, we completed the construction and opened Mega Lab, the largest diagnostics laboratory in Georgia and the Caucasus region. The diagnostics business is already delivering break-even EBITDA, with costs of our lab services at Group’s healthcare facilities having been maintained at the same level. Over 550,000 tests were performed in the first nine months of the year, from over 214,000 patients – a significant achievement.

We have already opened seven blood collection points in our GPC pharmacies, serving c.1,300 customers and performing c.2,500 tests, with the plan to have c.50 over the next few years. The business will also work on additional external contracts, serving healthcare facilities outside the Group.


Quality and IT development. Our focus remains on quality and IT development projects that are crucial to our patient/customer experience, the performance of our businesses and synergies across the Group. Recently established clinical boards and clinical KPI monitoring systems are further enhancing quality standards in our healthcare facilities, towards international benchmarks. We have successfully implemented software development projects inside the company and made strong progress in developing an integrated digital healthcare ecosystem serving patients across the whole country. After launching a comprehensive electronic medical records system (EMR) in all polyclinics and community clinics, substituting 100% of paperwork, we have also successfully implemented medical ordering system in all our referral hospitals (representing c. 60% of full EMR functionality). Further, our innovative new digital consumer health platform “EKIMO” is complete and will be launched by the year-end. Version 1.0 already consolidates the entire vertical spectrum of primary care in the country (primary care doctors and clinics, diagnostics, pharmacies, medical insurance and more) and is open to any local healthcare provider. With this initiative we are well on the way to achieving the Group’s mission of building and providing a consolidated customer journey for the country’s entire healthcare ecosystem, thereby improving the quality of healthcare and the value proposition for our patients and customers.

The Georgian macroeconomic environment. The Georgian economy continued its strong economic growth, with preliminary 5.0% real GDP growth in 9M19. Despite the cancellation by Russia of direct flights between Russia and Georgia, the tourism sector continued to grow, with the number of tourists increasing by 6% y-o-y in 9M19. The current account deficit shrank and reached its historic low of 4.6% of GDP in 1H19 on the back of the improved goods trade balance. At the same time that National Bank of Georgia increased the refinancing rate due to higher than targeted inflation as mentioned above, it also lowered the minimum reserve requirement for funds attracted in foreign currency and sold $72.8 million on foreign exchange auctions to provide liquidity to the markets. Following the earlier Fitch rating upgrade, in October 2019 S&P upgraded Georgia’s sovereign credit rating from BB- to BB with stable outlook, on the back of improved resilience towards negative external shocks and the strengthened external balance.

In what remains the seasonally quiet quarter of the year, our businesses have continued to deliver on key priorities and the significant investment programme of the last few years is now beginning to be reflected in business performance. We have also made strong progress in our balance sheet management objectives to improve cash flows, pay down debt to reduce interest costs, and therefore grow earnings more strongly than EBITDA. The Group’s performance in the first nine months of the year has demonstrated progress against these objectives, and we are well positioned to continue this progress during the remainder of 2019 and beyond.

Nikoloz Gamkrelidze,

CEO of Georgia Healthcare Group PLC


GHG overview

Georgia Healthcare Group is the largest and the only fully integrated healthcare provider in the fast-growing, predominantly privately-owned Georgian healthcare ecosystem with an aggregate annual value of c.GEL 3.8 billion. Georgia Healthcare Group PLC is the UK incorporated holding company of the Group and is listed on the premium segment of the London Stock Exchange.

Starting from 2019 the Group has updated its business structure and the healthcare services business was divided into the following two segments: clinics, which include polyclinics and community clinics, and hospitals, which include referral hospitals. Now GHG comprises five business lines: hospitals, clinics, pharmacy and distribution, medical insurance and diagnostics. Each business line has its own chief operating officer reporting to the Group CEO, pursuing value creation through revenue growth, profit growth and asset productivity (ROIC).

GHG is the single largest market participant in the healthcare services industry in Georgia, accounting for more than 23% of the country’s total hospital bed capacity, as of 30 September 2019. Through its vertically integrated network of hospitals and clinics, our healthcare services business offers the most comprehensive range of inpatient and outpatient services targeting virtually all segments of the Georgian market.


· hospitals business operates 18 referral hospitals with a total of 2,967 beds, providing secondary or tertiary level healthcare services, located in Tbilisi and major regional cities.

·clinics business operates 34 healthcare facilities, out of which:

– 19 are community clinics with a total of 353 beds, providing outpatient and basic inpatient healthcare services, located in regional towns and municipalities.

– 15 are district polyclinics, providing outpatient diagnostic and treatment services, located in Tbilisi and major regional cities.

GHG is the largest pharmaceuticals retailer and wholesaler in Georgia, with a c.32% market share by revenue. Our pharmacy and distribution business consists of a retail pharmacy chain and a wholesale business which sells pharmaceuticals and medical supplies to hospitals inside and outside the Group and to pharmacies outside the Group. The pharmacy chain operates under two separate brand names, Pharmadepot and GPC, with a total of 285 pharmacies, of which 21 are located within our healthcare facilities. The pharmacy and distribution business is the country’s largest retailer in terms of both revenue and number of bills issued.

GHG is also the largest provider of medical insurance in Georgia, with a 31.9% market share based on 2Q19 net insurance premiums. Our medical insurance business consists of private medical insurance operations in Georgia. We have a wide distribution network and offer a variety of medical insurance products primarily to Georgian corporate and state entities and also to retail clients. We have c.230,000 persons insured as at September 2019. The medical insurance business plays an important role in our business model, as it is a significant feeder for our polyclinics, pharmacies and hospitals.

GHG recently opened the largest diagnostics laboratory in Georgia and the entire Caucasus region. In December 2018, we added diagnostics business under GHG, an important new business line for the Group, by opening Mega Laboratory (“Mega Lab“). The multi-disciplinary laboratory, equipped with latest infrastructure and state-of-the-art equipment, covers 7,500 square metres. High-capacity automated systems enable GHG to provide accurate, high-quality results to the entire population of the country. In addition to basic laboratory tests, the new laboratory allows us to offer complex tests for oncology and a molecular lab. Some of the lab tests offered by Mega Lab have never been available in Georgia – in the past blood samples had to be sent abroad.

For a copy of the full press release, click on the link below:

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SOURCE: Georgia Healthcare Group PLC

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