- Consolidated Revenue: INR1,859 crores, a growth of 12.2% over Q1 FY24.
- Hospital Business Revenue: INR1,549 crores, a growth of 14.4% over Q1 FY24.
- Diagnostics Business Revenue: INR343 crores, on par with the previous year.
- Consolidated Operating EBITDA: INR343 crores, an increase of 25.5%, with a margin of 18.4% versus 16.5% in Q1 FY24.
- Hospital Business Operating EBITDA: INR287 crores, with margins improving by 330 basis points to 18.5%.
- Diagnostics Business Operating EBITDA Margin: 16.1% versus 19.4% in Q1 FY24.
- Consolidated Profit After Tax: INR174 crores, an increase of 40.4%.
- Net Debt-to-EBITDA: 0.22x as of June 30, 2024, down from 0.35x on June 30, 2023.
- Net Debt: INR308 crores as of June 30, 2024.
- Hospital Occupancy: Improved to 67% from 64% in Q1 FY24.
- Occupied Beds: Increased by 4.6% to 2,715 from 2,595 in Q1 FY24.
- ARPOB (Average Revenue Per Occupied Bed): Increased by 9.7% to INR2.41 crores per annum.
- Revenue from Medical Travel: Grew 11% to INR127 crores.
- Revenue from Digital Channels: Grew 52% year-over-year, contributing 30% to overall hospital revenues.
- Agilus Diagnostics Revenue: INR343.5 crores in Q1 FY25.
- Agilus Diagnostics Operating EBITDA: INR55 crores, with one-off expenses of INR9 crores.
- Average Realization Per Test: INR340.
- Average Revenue Per Patient: INR845.
- New Centers Added: Over 185 new centers and 3 hospital labs.
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fortis Healthcare Ltd (BOM:532843, Financial) reported a consolidated top line figure of INR1,859 crores, a growth of 12.2% over Q1 of financial year '24.
- The hospital business revenues grew 14.4% to INR1,549 crores, indicating strong performance in this segment.
- Consolidated operating EBITDA saw an uptick of 25.5%, reaching INR343 crores, yielding a margin of 18.4% versus 16.5% in Q1 of financial year '24.
- Hospital occupancy improved to 67% compared to 64% in Q1 of financial year '24, translating into occupied beds increasing by 4.6%.
- Revenues from digital channels demonstrated robust growth, contributing almost 30% to overall hospital revenues versus 23% in Q1 of financial year '24.
Negative Points
- Operating EBITDA margin in the diagnostics business decreased to 16.1% from 19.4% in Q1 of financial year '24.
- Certain one-off costs in the current quarter, including GST-related liabilities and higher provisions for bad and doubtful debt, impacted the EBITDA margin.
- The diagnostics business is still adjusting to the impact of the Agilus rebranding exercise, which involved extensive rebranding efforts and associated marketing costs.
- The EBITDA margin for some hospitals, such as FEHI and Vashi, has fallen below 10%, indicating underperformance in these facilities.
- The company faces potential financial strain due to the put option valuation of INR1,780 crores for the 31% stake held by private equity investors in Agilus Diagnostics.
Q & A Highlights
Q: Our overall occupancy on a sequential basis has improved from 66% to 67%, and ARPOB has also improved. However, operating EBITDA margin has decreased from 22.4% to 18.5%. What caused this dip in margins?
A: Vivek Goyal, CFO: There were certain one-offs in Q4, and even adjusted for that, Q4 margins were around 21%. The drop in Q1 margins is due to one-offs in the current quarter, including increased price capital for debt conversion, GST-related liabilities, and higher provisions for bad and doubtful debts. Additionally, the specialty mix this quarter, with higher shares of ortho and onco, contributed to the margin drop.
Q: How does this change your outlook for the full-year margin guidance?
A: Vivek Goyal, CFO: We targeted around 19% EBITDA margin for Q1 and are around that level. We are well on track for our EBITDA margin improvement guidance for the year.
Q: Regarding the hospital margin metrics, which facilities have seen a decline, and is this transitory?
A: Vivek Goyal, CFO: FEHI Hospital and CH Road in Bangalore have seen lower margins this quarter. FEHI's margin drop is due to annual increment costs, and CH Road faced challenges in passing on these costs. We are taking initiatives to improve these margins.
Q: Any update on the IPO plans or sale of Agilus Diagnostics?
A: Vivek Goyal, CFO: We have started the process as per the agreement, as the IPO process may not start immediately. An independent valuer has valued the 31% stake of private equity at around INR1,780 crores. We have committed facilities to fund this acquisition, and our debt/EBITDA will be around 1.5 times post-acquisition.
Q: What is the timeline for completing the acquisition of the PVP stake in Agilus?
A: Vivek Goyal, CFO: We expect the put option notice from the PE investor by August 13. Post notice, there is a 65-day period to complete the purchase, during which we will seek shareholder approval and possibly CCI approval.
Q: When can we expect growth in Agilus Diagnostics to reflect in numbers?
A: Anand K, CEO, Agilus Diagnostics: After the brand transition, we saw some degrowth in B2C segments. We are now catching up and expect to consolidate and get back on track in terms of growth expectations through this year.
Q: Any update on the high court litigation?
A: Ashutosh Raghuvanshi, CEO: The hearing for Fortis and the bank has been completed. The next hearing is for Religare, which we believe is the last party to be heard. The hearings are likely to conclude soon.
Q: What are the drivers for growth in FMRI and Mohali hospitals, and what is the outlook for the full year?
A: Vivek Goyal, CFO: Mohali added 30 beds last year, leading to increased occupancy and ortho business growth. FMRI is operating at 75%+ occupancy, with new clinical talent in onco and cardiac. We are expediting expansion to accommodate more patients.
Q: How does management address patient dissatisfaction and ensure service quality across hospitals?
A: Ashutosh Raghuvanshi, CEO: We monitor NPS and have an internal system for addressing grievances. There is a mechanism at both unit and corporate levels to deal with issues. We also have a central team that audits each unit quarterly.
Q: What is the impact of the IndAS-116 on this quarter's numbers?
A: Vivek Goyal, CFO: There is hardly any impact on the hospital business. For the diagnostics business, we will share the specific numbers offline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
