Unaudited Financial Statements Announcement For The First Quarter Ended 31 March 2018
Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.
Profit & Loss
Review of the Group's Performance
Revenue increased by S$1.2 million or 17.3% from S$7.0 million for the three months period ended 31 March 2017 ("Q1 2017") to S$8.2 million for the three months period ended 31 March 2018 ("Q1 2018"). The increase is attributed to:
- The increase of S$0.5 million, S$0.4 million and S$0.1 million revenue from our Obstetrics & Gynaecology ("O&G"), Cancer-related and Dermatology segment respectively; and
- The contribution of S$0.2 million from our new Paediatrics segment, namely SOG Children (Paediatrics-East) Clinic ("PAED-East Clinic") and SOG Children (Paediatrics-Central) Clinic ("PAED-Central Clinic") which started operations in July 2017 and November 2017 respectively.
Other Operating Income
Other operating income comprises clinic rental rebates, government grants received and sponsorship income. Sponsorship income relates to income received from sponsors for public events and activities organised by the Company.
Other operating income increased by S$50,000 or more than 100.0% for Q1 2018 as compared to Q1 2017. The increase is due to:
- Clinic rental rebate of S$44,000 received from a lessor;
- Higher government grants of S$8,000; offset by
- Lesser sponsorship income of S$2,000.
Consumables and Medical Supplies Used
In general, the O&G, Cancer-related and Paediatrics practices use lesser consumables and medical supplies as compared to the Dermatology practice which requires more consumables and medical supplies such as skin care products.
By far, our Cancer-related practice uses the least consumables and medical supplies as our Cancer Specialists, who are Breast Surgeon and GynaeOncologist, perform their major procedures in the hospitals and thus, the consumables and medical supplies are taken care of and billed by the hospitals.
Consumables and medical supplies used increased by S$0.2 million or 21.0%. The increase is attributed mainly to the increase in consumables and medical supplies used by O&G and Dermatology segments arising from increase in patient loads for Q1 2018.
Consumables and medical supplies used as a percentage of the Group's revenue increased slightly by 0.4% from 15.2% for Q1 2017 to 15.6% for Q1 2018. This is due mainly to higher consumables and medical supplies used by our Dermatology segment.
Employee Remuneration Expense
Employee remuneration expense increased by S$0.3 million or 12.2% from S$2.8 million for Q1 2017 to S$3.1 million for Q1 2018. The increase is due mainly to:
- An increase of S$0.2 million quarterly accrual for incentive bonus for a few specialist medical practitioners;
- Employee remuneration expense of S$0.2 million from our new Paediatrics segment which started in July 2017; offset by
- Reversal of S$0.1 million due to over-provision of FY 2017 bonuses.
Employee remuneration expense as a percentage of the Group's revenue decreased by 1.8% from 40.3% in Q1 2017 to 38.5% in Q1 2018 as the employee remuneration expense for the Corporate Office for Q1 2018 was lower than Q1 2017.
Depreciation of Plant and Equipment
Depreciation of plant and equipment increased by S$28,000 or 23.8% from S$118,000 for Q1 2017 to S$146,000 for Q1 2018. The increase is attributed mainly to the depreciation charge arising from:
- The two new laser machines acquired for SOG Dermatology Clinic in June 2017 and August 2017; and
- The renovation of Heng Clinic for Women ("Heng Clinic") and our Corporate Office at Mountbatten Square in May 2017 and July 2017 respectively.
Depreciation as a percentage of the Group's revenue increased slightly by 0.1% from 1.7% for Q1 2017 to 1.8% for Q1 2018 due mainly to the rate of increase in depreciation which is higher than the rate of increase in revenue contribution from our Dermatology segment.
Other Operating Expense
Other operating expense increased by S$0.1 million or 17.6% from S$0.7 million for Q1 2017 to S$0.8 million for Q1 2018. The increase is attributed to S$0.1 million incurred by our new Paediatrics segment in Q1 2018.
Other operating expense as a percentage of the Group's revenue increased slightly by 0.1% from 9.3% for Q1 2017 to 9.4% for Q1 2018 due to the rate of increase in other operating expense which is higher than the rate of increase in revenue contribution from our Paediatrics segment.
Finance income relates to the interest income earned from the placement of cash surplus with financial institutions. The funds are placed mainly in fixed deposits. The Group does not invest in any other financial products or derivatives.
Finance income increased by S$7,000 or more than 100.0% from S$6,000 for Q1 2017 to S$13,000 for Q1 2018. The increase is due to more cash being placed on fixed deposit.
Finance expense relates to the unwinding of the discount implicit (i.e. non-cash flows item) in the second and third cash tranche consideration of S$4.0 million for each tranche due on 1 January 2017 and 1 January 2018 respectively (the "contingent consideration") for the acquisition of the entire rights, title and interest of Dr. Joyce Lim Teng Ee and in the business and medical practices of JL Laser & Surgery Centre Pte. Ltd., JL Esthetic Research Centre Pte. Ltd. and JL Dermatology Pte. Ltd. on 1 January 2016 (the "JL Acquisition").
As at 31 December 2017, the contingent consideration for the JL Acquisition was fully paid. Accordingly, there was no finance expense in Q1 2018.
Profit Before Income Tax
As a result of the explanations above, profit before income tax increased by S$0.6 million from S$2.3 million for Q1 2017 to S$2.9 million for Q1 2018.
Income Tax Expense
Income tax expense increased by S$0.1 million or 42.2% due mainly to higher profits for Q1 2018 and in particular, a few of our newer clinics have delivered better profits in Q1 2018.
Review of the Group's Financial Position
As at 31 March 2018, non-current assets amounted to S$28.5 million or 54.1% of the Group's total assets. Non-current assets consist of the following:
- Goodwill of S$26.9 million or 94.4% of the Group's total non-current assets. This comprises:
- S$446,000 and S$396,000 for the acquisition of Beh's Clinic for Women Pte. Ltd. and Choo Wan Ling Women's Clinic Pte. Ltd. in 2014 respectively, and
- S$26.1 million for the JL Acquisition in 2016.
- Plant and equipment of S$1.6 million or 5.5% of the Group's total noncurrent assets. Plant and equipment decreased by S$80,000 or 4.9%. The decrease is attributed to the depreciation charge of S$146,000 offset by the plant and equipment additions of S$66,000 in Q1 2018.
- Deferred tax assets of S$35,000 or 0.1% of the Group's total non-current assets, arising from the deductible temporary differences related to the Group's plant and equipment and unused tax losses from our new Paediatrics segment.
As at 31 March 2018, current assets amounted to S$24.2 million or 45.9% of the Group's total assets. Current assets consist of the following:
- Inventories remains constant at S$1.6 million or 6.7% of the Group's total current assets.
- Trade and other receivables of S$2.6 million or 10.7% of the Group's total current assets. The increase of S$0.1 million or 2.5% is due mainly to the rental deposits under previous tenancy agreements of our two clinics which will be refunded by the landlords.
- Cash and cash equivalents of S$20.0 million or 82.6% of the Group's total current assets. The increase of S$3.6 million or 21.6% is due mainly to the net cash inflows from operating activities in Q1 2018.
As at 31 March 2018, non-current liabilities amounted to S$0.1 million or 1.8% of the Group's total liabilities. Non-current liabilities consist of only deferred tax liabilities.
Deferred tax liabilities arose from the timing differences in tax payable of the Group's plant and equipment.
As at 31 March 2018, current liabilities amounted to S$6.7 million or 98.2% of the Group's total liabilities. Current liabilities consist of the following:
As at 31 March 2018, shareholder's equity of S$46.0 million comprises the following:
- Issued and fully paid share capital of S$29.6 million.
- Reserves of S$16.3 million comprising:
- Capital reserve of S$1.8 million representing the difference between the fair value of the purchase consideration paid by the Company and the fair value of the net assets of Choo Wan Ling Women's Clinic Pte. Ltd. and Beh's Clinic for Women Pte. Ltd. acquired by the Company;
- Retained earnings of S$16.2 million; offset by
- Merger reserve of S$1.7 million representing the difference between the consideration paid by the Company and the fair value of the net assets of Heng Clinic and KW Lee Clinic & Surgery for Women Pte. Ltd. acquired by the Company.
Review of the Group's Cash Flows
Net Cash Generated from Operating Activities
For Q1 2018, there was a net cash inflow of S$3.6 million from operating activities. This comprises operating profit before changes in working capital of S$3.1 million, net working capital inflows of S$0.5 million and income tax credit of S$4,000 received. The net working capital inflows of S$0.5 million is attributed mainly to the increase of S$0.6 million in quarterly accrual for incentive bonus for a few specialist medical practitioners.
Net Cash Used in Investing Activities
For Q1 2018, net cash used in investing activities amounted to S$32,000 which was attributed to:
- The acquisition of plant and equipment of S$66,000; offset by
- Interest received of S$34,000 from our fixed deposit placement.
Net Cash used in Financing Activities
For Q1 2018, there was no cash flows movement for financing activities.
As at the date of this Announcement, the Board of Directors is not aware of any significant change in trends and competitive conditions that will significantly affect the Group's operations and businesses. The Singapore Government has not changed its policy on or actions in encouraging population growth nor has there been any macro health risks, such as Severe Acute Respiratory ("SAR"), Middle East Respiratory Syndrome ("MERS") and Zika virus, which could severely affect private healthcare visitations.
On 1 July 2017, the Group extended its services through the offering of general paediatrics and adolescent medicine services. With the new Paediatrics segment, it allows the Group to continue to take care of our existing patients and their newborns. As this is a new segment and in a start-up phase, the Group expects the contribution from this segment to continue to be moderate for FY 2018.
Barring any unforeseen circumstances, the Board of Directors expects the Group to remain profitable in the next reporting period and the next 12 months.