Fortis Q2 Net Loss Widens to ₹1.67 Billion; Margins Improve Sequentially

Fortis Healthcare Ltd’s (FHL) net loss has widened to ₹1.67 billion for the second quarter of the fiscal even as the hospital and diagnostic major showed an improvement in margins on a sequential basis. FHL had posted a net loss of ₹459 million in the corresponding quarter last year. The company noted in a statement that the net profit for Q2FY19 was primarily impacted by impairment of goodwill and investments. The revenues for the quarter under review came in at ₹11.4 billion, marginally down from ₹11.9 billion in Q2FY18. However, on a sequential basis, the revenues have improved from ₹10.4 billion in Q1FY19. According to Bloomberg estimates, the revenue was expected at ₹12.23 billion while a net loss of ₹205 million was expected by the analysts. The earnings before interest, tax, depreciation and amortization (EBITDA) came in at ₹1.42 billion. The EBITDA margin of 12.5 percent was down from 16.7 percent in the corresponding quarter last year. It, however, showed an improvement on a sequential basis, from 7.7 percent in Q1FY19.

The hospital business revenues stood at ₹9 billion as against ₹9.6 billion in Q2FY18 and ₹8.2 billion in Q1FY19. The diagnostic business net revenues of ₹2.35 billion has improved on a year on year basis from ₹2.24 billion in Q2FY18. The hospital business occupancy continued to show an upward trend with Q2FY19 occupancy at 69 percent compared to 62 percent in Q1FY19 and October 2018 witnessing around 71 percent occupancy. “Our operating profitability has witnessed significant growth with the EBITDAC in the hospital business more than doubling to ₹880 million from ₹420 million in the trailing quarter. Our SRL business has also shown a robust improvement in profitability in the quarter,” said Bhavdeep Singh, CEO of FHL. The EBITDAC is calculated before net business trust costs. Fortis pays a fee to RHT for its hospital assets. For the half year ended September 30, 2018, FHL posted revenues of ₹21.82 billion versus ₹23.54 billion in H1FY18.

The company has posted a net loss of ₹2.3 billion as against a net loss of ₹404 million in the previous period. FHL said that Northern TK Ventures Pte Ltd (a subsidiary of IHH) has received the approval from the Competition Commission of India (CCI) and both FHL and IHH are working to close the transaction shortly. The transaction would include fund infusion of ₹40 billion with a preferential allotment of 31 percent stake to IHH followed by an open offer by IHH for up to 26 percent. of the expanded equity capital of the company. Capital raised would primarily be utilized to complete the proposed acquisition of RHT Indian assets which will result in the elimination of clinical establishment fee that Fortis pays to RHT. Ravi Rajagopal, chairman, FHL said, “While this Quarter has witnessed strong performance versus the trailing quarter, the impending investment by IHH would further help strengthen the business.” – Business Standard

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