Bumrungrad Hospital Plc., one of the country’s leading high-end healthcare operators, reported a sharp decline in its quarterly earnings after the country was faced with a coronavirus-induced lockdown that barred foreign visitors from coming into the country, a key source of income for the hospital.
BH reported that its Q2 profits declined by 93.87 per cent to stand at a mere 44.43 million baht from the 724.99 million baht reported during the same period last year.
For the first 6-months of the year, BH reported a net profit decline of 55.18 per cent to 809.63 million baht against 1.81 billion baht for the first 6-months of 2019.
Despite the 94 per cent decline in profits BH also announced that it was going to be paying an interim dividend of 1.15 baht a share with the shares going XD (Excluding Dividend) on August 19, 2020. This payment of dividend is for the hospital’s operations during January-June 2020.
BH, which is the go-to place for most high-end Thais and foreign medical tourists, has seen its revenues dry up as the country’s international airports remained shut to commercial flights.
The impact of the airport closure and airlines canceling their flights into Thailand, took a major toll on the revenues of the hospital, which in the past has said that about 60-70 per cent of its revenues are derived from the international medical tourists.
To make matters worse, the 2nd quarter of the year was also the peak of the pandemic in Thailand, and domestic patients were scared to go to hospitals for treatment amid fear that the hospitals could be a source of infection.
BH said in a statement to the Stock Exchange of Thailand (SET) that the hospital reported a total revenue during the 2nd quarter of 2.49 billion baht. This amount represented a 42.8 per cent decrease from Q2 2019 total revenues of 4.35 billion baht.
As a result of COVID-19, BH’s profit for Q2 2020 decreased by 93.9 per cent to 44 million baht from 725 million baht in Q2 2019, with net profit margin at 1.8 per cent in Q2 2020, compared to 16.7 per cent in Q2 2019.
Total revenues for the 6-months of 2020 decreased to 6.66 billion baht, or 26.6 per cent less than 9.08 billion baht in 6-months of 2019. Net profit for 6-months of 2020 decreased by 55.2 per cent to 810 million baht from 1.81 billion baht in 6-months of 2019, with net profit margin at 12.2 per cent in the 1st 6-months of 2020 compared to 19.9 per cent in 1st 6-months of 2019.
The earnings were worse than most analysts had anticipated.
“We expect BDMS and BH to report net profit of 989 million baht and 268 million baht, respectively for 2Q, representing heavy declines of 47 per cent and 63 per cent year-on-year (YoY). For Thai patient operations, both hospital groups reported the biggest slumps in April as non-critical patients avoided hospitals, road traffic (and hence, accidents) fell, and social gatherings were curtailed,” Attaphol Tisayukata, an analyst at TISCO Securities, wrote in a note to clients in late July in an overview of the healthcare sector.
Attaphol added that the month of May and June should report improvement (albeit still down YoY) as Thailand began easing its pandemic related lockdown in those months.
He said that during the quarter, no tourist arrivals were recorded, drying up international revenue. This, combined with persistent fixed costs, should translate to substantial earnings weakness YoY for both companies.
Attaphol had anticipated that 2Q20 earnings to be 268 million baht, down 63 per cent YoY, due to lower revenue from lack of international patients and lower Thai revenue, as well as persistent fixed expense obligations.
“We expect revenue to fall by 46 per cent as revenue from the international segment collapsed amid the border closures. For Thai and expat revenue, we also expect weakness as patients feared attending hospitals (particularly in April) while recovery should be expected in May and June. Note that we expect the Thai revenue proportion to increase from the 35 per cent seen in 2Q19.”
He said that the expenses were expect (both SG&A and cost of goods sold) to decrease by 39 per cent, less than the decline in revenue as BH has outstanding fixed expenses (fixed to variable expense of 45% to 55%).
“Thus, we expect EBITDA margin in 2Q20 to decline from 30.6 per cent to 36.6 per cent YoY. Similarly, we expect EBIT margin for the quarter to weaken from 23.4 per cent to 13.6 per cent YoY.”