Unaudited Financial Statements Announcement For The Third Quarter Ended 30 September 2017

Financials Archive

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Profit & Loss

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Balance Sheet

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Review of the Group's Performance

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Revenue

Revenue increased by S$0.2 million or 2.4% from S$7.5 million for the three months period ended 30 September 2016 ("Q3 2016") to S$7.7 million for the three months period ended 30 September 2017 ("Q3 2017"). The increase is attributed to:

  • The increase of S$0.1 million revenue each from both our Cancerrelated and Dermatology segments in Q3 2017 respectively;
  • Revenue contribution of S$0.1 million from our new Paediatrics segment, SOG Children (Paediatrics-East) Clinic ("PAED Clinic") which started operations in July 2017; offset by
  • The decrease of S$0.1 million from our Obstetrics & Gynaecology ("O&G") segment in Q3 2017.

YTD Sep 2017 vs. YTD Sep 2016

Revenue increased by S$0.5 million or 2.3% from S$21.5 million for the nine months period ended 30 September 2016 ("YTD Sep 2016") to S$22.0 million for the nine months period ended 30 September 2017 ("YTD Sep 2017"). The increase is attributed to:

  • The increase of S$0.2 million and S$0.6 million revenue from our O&G and Cancer-related segment for YTD Sep 2017 respectively;
  • Revenue contribution of S$0.1 million from our new PAED Clinic which started in July 2017; offset by
  • The decrease of S$0.4 million revenue from our Dermatology segment for YTD Sep 2017.

Other Operating Income

Other operating income mainly includes 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.

Q3 2017 vs. Q3 2016

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Other operating income increased by S$24,000 or 27.7% for Q3 2017 as compared to Q3 2016. The increase is due to:

  • More clinic rental rebates of S$22,000 received from a lessor; and
  • More sponsorship income of S$18,000 received from sponsors, offset by
  • Fewer government grants of S$17,000 received in Q3 2017.

YTD Sep 2017 vs. YTD Sep 2016

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Other operating income decreased slightly by S$10,000 or 4.7% for YTD Sep 2017 as compared to YTD Sep 2016. The decrease is due to:

  • Fewer government grants of S$72,000 received; offset by
  • More sponsorship income of S$41,000 received; and
  • More clinic rental rebates of S$22,000 received from a lessor in YTD Sep 2017.

Consumables and Medical Supplies Used

In general, the O&G, Cancer-related and Paediatrics practices uses fewer 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 are Breast Surgeon and GynaeOncologist who perform their major procedures in the hospitals and thus, the consumables and medical supplies are taken care of and billed by the hospitals.

Q3 2017 vs. Q3 2016

Consumables and medical supplies used decreased by S$26,000 or 2.4%. The decrease is mainly attributed to decrease in consumables and medical supplies used by our Dermatology segment as a result of cost savings from bulk purchases.

Consumables and medical supplies used as a percentage of the Group's revenue decreased slightly by 0.7% from 14.8% for Q3 2016 to 14.1% for Q3 2017. This is mainly due to the cost savings from bulk purchases in Q3 2017.

YTD Sep 2017 vs. YTD Sep 2016

Consumables and medical supplies used remained fairly consistent at S$3.1 million for both YTD Sep 2017 and YTD Sep 2016 despite a slight increase in revenue.

Consumables and medical supplies used as a percentage of the Group's revenue decreased slightly by 0.3% from 14.6% for YTD Sep 2016 to 14.3% for YTD Sep 2017. This is mainly due to our continuous cost containment effort.

Employee Benefits Expense

Q3 2017 vs. Q3 2016

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Employee benefits expense increased by S$0.1 million or 4.7% from S$2.9 million for Q3 2016 to S$3.0 million for Q3 2017. The increase is mainly due to the maiden salary and benefits expense of the new specialist medical practitioner and clinical staff for our PAED Clinic which started in July 2017.

Employee benefits expense as a percentage of the Group's revenue increased slightly by 0.9% from 38.2% in Q3 2016 to 39.1% in Q3 2017 as our PAED Clinic had just started in July 2017 and is still building up its patient loads.

YTD Sep 2017 vs. YTD Sep 2016

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Employee benefits expense increased by S$0.5 million or 6.8% from S$8.1 million for YTD Sep 2016 to S$8.6 million for YTD Sep 2017. The increase is mainly due to:

  • The increase in employee benefits expense of S$0.1 million from SOGSK Lim Breast and General Surgicare Clinic ("SK Lim Clinic") which started in May 2016;
  • The increase in employee benefits expense of S$0.2 million from SOGSC Hong Clinic for Women ("SC Hong Clinic") which started in July 2016; and
  • The maiden employee benefits expense of S$0.1 million from PAED Clinic which started in July 2017.

Employee benefits expense as a percentage of the Group's revenue increased by 1.7% from 37.7% for YTD Sep 2016 to 39.4% for YTD Sep 2017 as our new clinics are still building up their patient loads.

Depreciation of Plant and Equipment

Q3 2017 vs. Q3 2016

Depreciation of plant and equipment increased by S$21,000 or 19.4% from S$106,000 for Q3 2016 to S$127,000 for Q3 2017. The increase is mainly attributed to the depreciation charge arising from:

  • The new laser machine acquired for SOG Dermatology Clinic in December 2016, and
  • The new ultrasound machine acquired for SC Hong Clinic in August 2016.

Depreciation as a percentage of the Group's revenue increased by 0.2% from 1.4% for Q3 2016 to 1.6% for Q3 2017 mainly due to a lower revenue contribution from our O&G segment in Q3 2017.

YTD Sep 2017 vs. YTD Sep 2016

Depreciation increased by S$94,000 or 34.3% from S$273,000 for YTD Sep 2016 to S$367,000 for YTD Sep 2017. The increase is mainly attributed to the depreciation charge arising from:

  • The new laser machine acquired for SOG Dermatology Clinic in December 2016; and
  • The three new ultrasound machines acquired for SC Hong Clinic, SK Lim Clinic and Heng Clinic for Women ("Heng Clinic") in August 2016, January 2017 and March 2017 respectively.

Depreciation as a percentage of the Group's revenue increased by 0.4% from 1.3% for YTD Sep 2016 to 1.7% for YTD Sep 2017 mainly due to a lower revenue contribution from our Dermatology segment in YTD Sep 2017.

Other Operating Expense

Q3 2017 vs. Q3 2016

Other operating expense increased by S$0.1 million or 21.3% from S$0.7 million for Q3 2016 to S$0.8 million for Q3 2017. The increase is mainly attributed to:

  • The increase in rental expense of S$50,000 for our new corporate office lease at Mountbatten Square and two clinics;
  • Donation of S$30,000 to a registered charity organisation; and
  • Maiden other operating expense of S$30,000 incurred by PAED Clinic which started operations in July 2017.

Other operating expense as a percentage of the Group's revenue increased by 1.5% from 8.6% for Q3 2016 to 10.1% for Q3 2017 mainly due to a lower revenue contribution from the newly specialist medical practitioners as compared to the senior specialist medical practitioners.

YTD Sep 2017 vs. YTD Sep 2016

Other operating expense increased by S$0.2 million or 8.5% from S$2.0 million for YTD Sep 2016 to S$2.2 million for YTD Sep 2017. The increase is mainly attributed to:

  • The increase of S$142,000 in rental expenses from our new corporate office and clinics; and
  • The increase of S$50,000 in medical professional indemnity insurances for most of our specialist medical practitioners.

Other operating expense as a percentage of the Group's revenue increased by 0.5% from 9.4% for YTD Sep 2016 to 9.9% for YTD Sep 2017 mainly due to a lower revenue contribution from the newly recruited specialist medical practitioners as compared to the senior specialist medical practitioners.

Finance Income

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

Q3 2017 vs. Q3 2016

Finance income increased by S$13,000 or more than 100.0% from S$1,000 for Q3 2016 to S$14,000 for Q3 2017. The increase is due to more cash placed under fixed deposit arrangement.

YTD Sep 2017 vs. YTD Sep 2016

Finance income decreased by S$5,000 or 11.7% from S$45,000 for YTD Sep 2016 to S$40,000 for YTD Sep 2017. The decrease is due to lower fixed deposit interest.

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 (actual payment of S$4.0 million for each tranche due on 1 January 2017 and 1 January 2018 respectively for the Acquisition of JL.

Q3 2017 vs. Q3 2016

As the second cash tranche consideration was paid off in January 2017, the finance expense decreased by S$53,000 or 46.9% from S$112,000 for Q3 2016 to S$59,000 for Q3 2017. The finance expense for Q3 2017 relates to the third cash tranche consideration due on 1 January 2018.

YTD Sep 2017 vs. YTD Sep 2016

Finance expense decreased by S$158,000 or 46.9% from S$337,000 for YTD Sep 2016 to S$179,000 for YTD Sep 2017. The decrease is as discussed above.

Profit Before Income Tax

Q3 2017 vs. Q3 2016

As a result of the above, profit before income tax remained consistent at S$2.8 million for both Q3 2016 and Q3 2017.

YTD Sep 2017 vs. YTD Sep 2016

Profit before income tax decreased by S$0.2 million or 2.4% from S$7.9 million for YTD Sep 2016 to S$7.7 million for YTD Sep 2017.

Income Tax Expense

Q3 2017 vs. Q3 2016

Income tax expense increased by S$84,000 or 25.2% mainly due to lesser tax rebates and allowances for FY 2017 as compared to FY 2016.

YTD Sep 2017 vs. YTD Sep 2016

Income tax expense increased by S$178,000 or 17.6% as discussed above.

Review of the Group's Financial Position

Non-Current Assets

As at 30 September 2017, non-current assets amounted to S$28.7 million or 56.6% of the Group's total assets. Non-current assets consist of the following:

  • Goodwill of S$26.9 million or 93.9% 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 Acquisition of JL in 2016.
  • Plant and equipment of S$1.6 million or 5.5% of the Group's total noncurrent assets. Plant and equipment increased by S$24,000 or 1.6%. The slight increase is attributed to the plant and equipment additions of S$391,000, offset by its corresponding depreciation charge of S$367,000, in YTD Sep 2017.
  • Available-for-sale financial assets of $0.1 million or 0.5% of the Group's total non-current assets. The balance represents the cost of investment in SG Meditech Pte. Ltd. of S$0.2 million less impairment charge of S$0.1 million as at 30 September 2017.
  • Deferred tax assets of S$12,000 or less than 0.1% of the Group's total non-current assets, arising from the deductible temporary differences related to the Group's plant and equipment.

Current Assets

As at 30 September 2017, current assets amounted to S$22.0 million or 43.4% of the Group's total assets. Current assets consist of the following:

  • Inventories of S$2.3 million or 10.4% of the Group's total current assets. The increase of S$0.1 million or 6.2% is mainly due to more inventories held by our Dermatology segment as at 30 September 2017.
  • Trade and other receivables of S$2.2 million or 10.2% of the Group's total current assets. The increase of S$0.1 million or 7.1% is mainly due to the prepayment for other operating expenses such as medical professional indemnity insurances.
  • Cash and cash equivalents of S$17.5 million or 79.4% of the Group's total current assets. The decrease of S$3.9 million or 18.2% is mainly due to the payment of the second tranche cash consideration of S$3.8 million (S$4.0 million less FY 2015 final dividend of S$234,617 received by Dr. Joyce Lim in respect of the 20,401,501 consideration shares allotted) for the Acquisition of JL in January 2017.

Non-Current Liabilities

As at 30 September 2017, non-current liabilities amounted to S$76,000 or 0.8% 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 payables of the Group's plant and equipment.

Current Liabilities

As at 30 September 2017, current liabilities amounted to S$9.1 million or 99.2% of the Group's total liabilities. Current liabilities consist of the following:

  • Trade and other payables of S$7.4 million or 81.4% of the Group's total current liabilities. The increase of S$0.4 million or 5.2% is mainly due to:
    1. The revaluation effect of S$0.2 million as at 30 September 2017 on the contingent consideration relating to the fair value of the third tranche cash consideration payable for the Acquisition of JL due on 1 January 2018; and
    2. The increase of S$0.1 million in trade payables due to slower payment pattern in Q3 2017.
  • Deferred revenue of S$0.4 million, or 4.8% of the Group's total current liabilities, relates to antenatal package fees collected upfront from patients for consultations that have yet to be performed. The increase of S$58,000 or 15.1% is due to the increase in antenatal package fees received.
  • Current tax liabilities of S$1.3 million, or 13.8% of the Group's total current liabilities, comprise of income tax payables of S$0.1 million and S$1.2 million for FY 2016 and FY 2017 respectively.

Shareholders' Equity

As at 30 September 2017, shareholder's equity of S$42.0 million comprises of the following:

  • Issued and fully paid share capital of S$29.6 million.
  • Reserves of S$11.8 million which comprise of:
    1. Capital reserve of S$1.8 million represents the difference between the fair value of the purchase consideration paid by the Company and 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$11.7 million; offset by
    3. Merger reserve of S$1.7 million represents the difference between the consideration paid by the Company and 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 Q3 2017, there was a net cash inflow of S$2.8 million from operating activities. This comprises operating cash inflows before changes in working capital of S$2.9 million, net working capital inflows of S$0.5 million and income tax paid of S$0.6 million. The net working capital inflows of S$0.5 million is mainly attributed to:

  • The revaluation effect of S$0.2 million on the fair value of the third tranche cash contingent consideration payable for the Acquisition of JL due on 1 January 2018; and
  • The increase in trade payables of S$0.1 million due to slower payment pattern in Q3 2017.

For YTD Sep 2017, the Group generated a net cash inflow from operating activities of S$6.7 million which is a decrease of S$0.3 million or 4.8% as compared to S$7.0 million in the previous corresponding period. The decrease is mainly due to a lower profit before tax of S$0.2 million as compared to the previous corresponding period.

Net Cash Used in Investing Activities

For Q3 2017, net cash used in investing activities amounted to S$42,000 which was mainly attributed to the purchase of an aesthetic medical equipment for SOG Dermatology Clinic and an ultrasound machine for our O&G Clinic.

For YTD Sep 2017, the net cash used in investing activities amounted to S$3.9 million which was mainly attributed to the payment of the second tranche cash consideration of S$3.8 million for the Acquisition of JL in January 2017.

Net Cash used in Financing Activities

For Q3 2017, the net cash used in financing activities amounted to S$2.9 million which was attributed to FY 2017 interim dividend paid to shareholders in August 2017.

For YTD Sep 2017, the net cash used in financing activities amounted to S$6.7 million which was attributed to FY 2016 final dividend of $3.8 million and FY 2017 interim dividend of S$2.9 million paid to shareholders in May 2017 and August 2017 respectively.

Commentary

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 has extended its services through the offering of maiden 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 be moderate for FY 2017.

Barring any unforeseen circumstances, the Board of Directors expects the Group to remain profitable in the next reporting period and the next 12 months.