Unaudited Financial Statements Announcement For The Second Quarter and Half Year Ended 30 June 2018

Financials Archive

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Profit & Loss

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Balance Sheet

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Review of the Group's Performance

Q2 2018 vs. Q2 2017

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1H 2018 vs. 1H 2017

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N/M: Not meaningful.

Revenue

Q2 2018 vs. Q2 2017

Revenue increased by S$1.4 million or 19.0% from S$7.2 million for the three months period ended 30 June 2017 ("Q2 2017") to S$8.6 million for the three months period ended 30 June 2018 ("Q2 2018"). The increase is attributed to:

  • The increase of S$0.9 million and S$0.3 million revenue from our Obstetrics & Gynaecology ("O&G") and Cancer-related 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.

1H 2018 vs. 1H 2017

Revenue increased by S$2.6 million or 18.1% from S$14.2 million for the six months period ended 30 June 2017 ("1H 2017") to S$16.8 million for the six months period ended 30 June 2018 ("1H 2018"). The increase is attributed to:

  • The increase of S$1.4 million and S$0.7 million revenue from our O&G and Cancer-related segment respectively; and
  • The contribution of S$0.5 million from our new Paediatrics segment.

Other Operating Income

Other operating income typically comprises government grants received and sponsorship income. Sponsorship income relates to income received from sponsors for public events and activities organised by the Company.

Q2 2018 vs. Q2 2017

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Other operating income increased by S$1.2 million or more than 100.0% for Q2 2018 as compared to Q2 2017. The increase is due mainly to the receipt of the settlement amount of S$1.25 million from the Company's former Lead Independent Director, Mr. Christopher Chong Meng Tak ("Mr. Chong") where the Company and Mr. Chong have, without any admission as to liability, agreed to a full and final settlement on the Company's claim for S$1.5 million from Mr. Chong for a transaction of the Company in which Mr. Chong was involved (the "Dispute").

1H 2018 vs. 1H 2017

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Other operating income increased by S$1.3 million or more than 100.0% for 1H 2018 as compared to 1H 2017. The increase is due mainly to:

  • The receipt of S$1.25 million from Mr. Chong as discussed above; and
  • The clinic rental rebate of S$44,000 received from a lessor.

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.

Our Cancer-related practice uses the least consumables and medical supplies as our Cancer Specialists, who are Breast Surgeons 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.

Q2 2018 vs. Q2 2017

Consumables and medical supplies used increased by S$0.2 million or 15.6% from S$1.0 million for Q2 2017 to S$1.2 million for Q2 2018. As the consumables and medical supplies used are a direct cost attributed to the Group's revenue, the increase parallels the increase in revenue for the corresponding period.

Consumables and medical supplies used as a percentage of the Group's revenue decreased by 0.4% from 13.8% for Q2 2017 to 13.4% for Q2 2018 due mainly to our step-up cost containment effort in Q2 2018.

1H 2018 vs. 1H 2017

Consumables and medical supplies used increased by S$0.4 million or 18.4% from S$2.0 million for 1H 2017 to S$2.4 million for 1H 2018. The increase parallels the increase in the Group's revenue for the corresponding period.

Consumables and medical supplies used as a percentage of the Group's revenue remained consistent at 14.5% for 1H 2018 and 1H 2017.

Employee Remuneration Expense

Q2 2018 vs. Q2 2017

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Employee remuneration expense increased by S$0.5 million or 17.2% from S$2.8 million for Q2 2017 to S$3.3 million for Q2 2018. The increase is due mainly to:

  • An increase of S$0.3 million quarterly accrual for incentive bonus for a few specialist medical practitioners; and
  • Employee remuneration expense of S$0.2 million from our new Paediatrics segment which started in July 2017.

Employee benefits expense as a percentage of the Group's revenue decreased by 0.5% from 38.8% in Q2 2017 to 38.3% in Q2 2018 as the rate of increase in revenue contribution from our O&G and Cancer-related segment is higher than the rate of increase in employee remuneration expense.

1H 2018 vs. 1H 2017

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Employee remuneration expense increased by S$0.8 million or 14.7% from S$5.6 million for 1H 2017 to S$6.4 million for 1H 2018. The increase is due to:

  • An increase of S$0.5 million accrual for 1H 2018 incentive bonus for a few specialist medical practitioners; and
  • Employee remuneration expense of S$0.4 million from our new Paediatrics segment which started in July 2017; offset by
  • A decrease of S$0.1 million in accrual for 1H 2018 bonuses for corporate office.

Employee remuneration expense as a percentage of the Group's revenue decreased by 1.1% from 39.5% for 1H 2017 to 38.4% for 1H 2018 as the rate of increase in revenue contribution from our O&G and Cancer-related segment is higher than the rate of increase in employee remuneration expense.

Depreciation of Plant and Equipment

Q2 2018 vs. Q2 2017

Depreciation of plant and equipment increased by S$11,000 or 9.4% from S$122,000 for Q2 2017 to S$133,000 in Q2 2018. The increase is attributed mainly to the depreciation charge arising from:

  • A new laser machine acquired for SOG Dermatology Clinic in August 2017; and
  • The renovation of our Corporate Office at Mountbatten Square in July 2017.

Depreciation as a percentage of the Group's revenue decreased slightly by 0.2% from 1.7% for Q2 2017 to 1.5% for Q2 2018 as the rate of increase in revenue contribution from our O&G and Cancer-related segment is higher than the rate of increase in depreciation.

1H 2018 vs. 1H 2017

Depreciation increased by S$40,000 or 16.5% from S$240,000 for 1H 2017 to S$280,000 for 1H 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 remained consistent at 1.7% for 1H 2018 and 1H 2017.

Other Operating Expense

Q2 2018 vs. Q2 2017

Other operating expense increased by S$0.2 million or 26.6% from S$0.7 million for Q2 2017 to S$0.9 million for Q2 2018. The increase is attributed mainly to:

  • A non-recurring professional and legal fees of S$0.1 million incurred for the Dispute; and
  • S$0.1 million incurred by our new Paediatrics segment in Q2 2018.

Other operating expense as a percentage of the Group's revenue increased by 0.6% from 10.3% for Q2 2017 to 10.9% for Q2 2018 due mainly to the nonrecurring professional and legal fees incurred for the Dispute in Q2 2018.

1H 2018 vs. 1H 2017

Other operating expense increased by S$0.3 million or 22.4% from S$1.4 million for 1H 2017 to S$1.7 million for 1H 2018. The increase is attributed mainly to:

  • A non-recurring professional and legal fees of S$0.1 million incurred for the Dispute; and
  • S$0.2 million incurred by our new Paediatrics segment in 1H 2018.

Other operating expense as a percentage of the Group's revenue increased by 0.4% from 9.8% for 1H 2017 to 10.2% for 1H 2018 due mainly to the nonrecurring professional and legal fees incurred for the Dispute in Q2 2018.

Finance Income

Finance income relates to the interest income earned from the placement of cash surplus with financial institutions. The funds are placed mainly in fixed deposit arrangements. The Group does not invest in any sophisticated financial products or derivatives.

Q2 2018 vs. Q2 2017

Finance income remained consistent at S$19,000 for Q2 2018 and Q2 2017.

1H 2018 vs. 1H 2017

Finance income increased by S$7,000 or 27.3% from S$25,000 for 1H 2017 to S$32,000 for 1H 2018. The increase is due to more cash being placed in fixed deposit.

Finance Expense

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 is no finance expense in 2018.

Profit Before Income Tax

Q2 2018 vs. Q2 2017

As a result of the above, profit before income tax increased by S$1.8 million or 69.9% from S$2.6 million for Q2 2017 to S$4.4 million for Q2 2018.

1H 2018 vs. 1H 2017

Profit before income tax increased by S$2.4 million or 49.2% from S$4.9 million for 1H 2017 to S$7.3 million for 1H 2018.

Income Tax Expense

Q2 2018 vs. Q2 2017

Income tax expense increased by S$0.2 million or 43.2% due mainly to higher profits for Q2 2018.

1H 2018 vs. 1H 2017

Income tax expense increased by S$0.3 million or 42.8% due mainly to higher profits in 1H 2018.

Review of the Group's Financial Position

Non-Current Assets

As at 30 June 2018, non-current assets amounted to S$28.5 million or 55.6% of the Group's total assets. Non-current assets consist of the following:

  • Goodwill of S$26.9 million or 94.6% of the Group's total non-current assets, comprises:
    1. 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
    2. S$26.1 million for the JL Acquisition in 2016.
  • Plant and equipment of S$1.5 million or 5.2% of the Group's total noncurrent assets. Plant and equipment decreased by S$0.2 million or 9.7%. The decrease is attributed to the depreciation charge of S$0.3 million offset by the plant and equipment additions of S$0.1 million in 1H 2018.
  • Deferred tax assets of S$61,000 or 0.2% 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.

Current Assets

As at 30 June 2018, current assets amounted to S$22.7 million or 44.4% of the Group's total assets. Current assets consist of the following:

  • Inventories of S$1.7 million or 7.3% of the Group's total current assets. The increase of S$0.1 million or 4.0% is due mainly to higher inventories balance held by our Dermatology segment as at 30 June 2018.
  • Trade and other receivables of S$2.8 million or 12.4% of the Group's total current assets. The increase of S$0.3 million or 11.6% is due mainly to the increase in our specialist medical practitioners' professional fees due from hospitals and insurance companies. The outstanding professional fees are fairly current with no significant collection issues.
  • Cash and cash equivalents of S$18.2 million or 80.3% of the Group's total current assets. The increase of S$1.8 million or 11.0% is due mainly to:
    1. S$6.0 million net cash inflows from operating activities in 1H 2018; offset by
    2. S$4.2 million paid for FY 2017 final dividend to shareholders in May 2018.

Non-Current Liabilities

As at 30 June 2018, non-current liabilities amounted to S$0.1 million or 2.1% 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.

Current Liabilities

As at 30 June 2018, current liabilities amounted to S$5.6 million or 97.9% of the Group's total liabilities. Current liabilities consist of the following:

  • Trade and other payables of S$3.3 million or 59.4% of the Group's total current liabilities. The decrease of S$0.5 million or 13.1% is due mainly to:
    1. The payout of S$1.7 million for FY 2017 incentive bonus to our specialist medical practitioners in June 2018; offset by
    2. S$1.2 million in accrual for 1H 2018 incentive bonus for our specialist medical practitioners.
  • Deferred revenue remained consistent at S$0.4 million or 8.1% of the Group's total current liabilities. It relates to antenatal and aesthetics package fees collected upfront from patients for consultations and/or procedures that have yet to be performed.
  • Current tax liabilities of S$1.8 million or 32.6% of the Group's total current liabilities. It comprises income tax payables of S$0.7 million and S$1.1 million for FY 2017 and 1H 2018 respectively.

Shareholders' Equity

As at 30 June 2018, shareholder's equity of S$45.5 million comprises the following:

  • Issued and fully paid share capital of S$29.6 million.
  • Reserves of S$15.9 million which comprise:
    1. Capital reserve of S$1.8 million which represents 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 in 2014;
    2. Retained earnings of S$15.8 million; offset by
    3. Merger reserve of S$1.7 million which represents 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 Q2 2018, there was a net cash inflows of S$2.5 million from operating activities. This comprises operating cash inflows before changes in working capital of S$4.5 million, net working capital outflows of S$1.4 million and income tax paid of S$0.6 million. The net working capital outflows of S$1.4 million is due mainly to the payout of FY 2017 incentive bonus to our specialist medical practitioners in June 2018.

For 1H 2018, the Group generated a net cash inflows from operating activities of S$6.1 million which is an increase of S$2.2 million or 57.4% as compared to S$3.9 million in the previous corresponding period. The increase is due mainly to a higher profit before tax of S$2.4 million as compared to the previous corresponding period.

Net Cash Used in Investing Activities

For Q2 2018, the net cash used in investing activities amounted to S$6,000 which was attributed to the acquisition of computer and software for our O&G segment.

For 1H 2018, the net cash used in investing activities amounted to S$39,000 which was attributed to:

  • The acquisition of plant and equipment of S$73,000; offset by
  • Interest received of S$34,000 from our fixed deposit placement.

Net Cash used in Financing Activities

For Q2 2018 and 1H 2018, the net cash used in financing activities amounted to S$4.2 million which was attributed to the FY 2017 final dividend paid to shareholders in May 2018.

Commentary

As at the date of this Announcement, the Board of Directors are 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, Middle East Respiratory Syndrome and Zika virus, which could severely affect private healthcare visitations.

On 1 July 2017, the Group extended its services through the offering of maiden general paediatrics and adolescent medicine services (the "Paediatrics segment"). The new Paediatrics segment allows the Group to continue to take care of our existing patients and their newborns. As this is a new segment which is currently in its start-up phase, the Group expects the contribution from this segment 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.