Bumrungrad Hospital Public : Management Discussion and Analysis Quarter 1 Ending 31 Mar 2019

Ref: SET 62/05

	24 April 2019
Subject: Management Discussion and Analysis for the first quarter 2019 results
To:	Directors and Manager
	The Stock Exchange of Thailand

Bumrungrad Hospital PCL.

Management Discussion and Analysis for Consolidated 1Q19 results

24 April 2019

Summary

The Company reported Total revenues in 1Q19 of Baht 4,733 million, a 0.8% increase from 1Q18 revenues of Baht 4,694 million. Net profit for 1Q19 increased by 0.2% to Baht 1,081 million from Baht 1,079 million in 1Q18, with Net profit margin at 22.8% in 1Q19, compared to 23.0% in 1Q18.

Details of the management discussion and analysis follow:

Income statements

Quarterly Operational Performance

The Company reported Revenues from hospital operations of Baht 4,650 million, a 0.6% increase year-over-year from Baht 4,621 million in 1Q18. This was mostly due to a 2.3% increase in revenues from non-Thai patients, offset with a 4.0% decrease in revenues from Thai patients. As a result, the revenue contribution from Thai patients in 1Q19 was 33.0% and from non-Thai patients was 67.0%, compared with 34.5% and 65.5%, respectively, for 1Q18.

The Company reported Cost of hospital operations (including Depreciation and amortization) of Baht 2,495 million for 1Q19, or 2.2% less year-over-year from Baht 2,553 million in 1Q18. This represents a favorable change when compared to the 0.6% increase in Revenues from hospital operations, and contributed to a reduction in the percentage of cost to Revenues from hospital operations to 53.7% in 1Q19 compared with 55.2% in 1Q18. Selling expenses (including Depreciation and amortization) were Baht 115 million in 1Q19, or 46.6% more year-over-year from Baht 78 million in 1Q18. The variance was mostly due to Baht 27 million more marketing expense. Administrative expenses (including Depreciation and amortization) were Baht 765 million in 1Q19, or 11.1% more year-over-year from Baht 689 million in 1Q18. The variance was mostly due to Baht 20 million more depreciation and amortization, mostly due to BI Tower building renovation and new HIS software; Baht 15 million more consulting fee; Baht 10 million more software support and maintenance, mostly due to new IT support service; Baht 9 million more personnel cost associated with annual merit increase; and Baht 7 million more repair and maintenance expenses. EBITDA decreased by

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1.2% year-over-year to Baht 1,621 million in 1Q19 from Baht 1,640 million in 1Q18, with an EBITDA margin of 34.5% in 1Q19 compared to 35.2% in 1Q18.

1Q19 Depreciation and amortization was Baht 298 million, a decrease from Baht 302 million in 1Q18, mostly due to an adjustment of accelerated depreciation relative to the campus master plan.

Corporate income tax of Baht 242 million in 1Q19 was less than Baht 248 million in 1Q18. The variance was mostly due to the increase in tax benefit related to training expenses and the decrease in taxable operating profit.

Basic EPS were Baht 1.48 in both 1Q19 and 1Q18, while 1Q19 Diluted EPS was Baht 1.25 compared to Baht 1.24 in 1Q18.

Income statements
(Unit: Baht million)	1Q19	1Q18	Change
Revenues from hospital operations	4,650	4,621	0.6%
Total revenues	4,733	4,694	0.8%
EBITDA	1,621	1,640	-1.2%
Net profit	1,081	1,079	0.2%
EBITDA margin	34.5%	35.2%
Net profit margin	22.8%	23.0%
EPS
(Unit: Baht)	1Q19	1Q18	Change
EPS - Basic	1.48	1.48	0.2%
EPS - Fully Diluted	1.25	1.24	0.2%

Statements of financial position

As at 31 March 2019, the Company reported Total current assets of Baht 11,483 million, a decrease from Baht 12,101 million as at 31 December 2018. The variance was mostly due to a net decrease of Baht 547 million in Cash, Cash equivalents, and Short-term investments, mostly due to Baht 1,900 million Other long-term investments in bonds and debentures; and Baht 228 million capital spending in 1Q19; offset with Baht 1,663 million increase in cash from operating activities. Trade receivables were Baht 2,449 million as at 31 March 2019 versus Baht 2,541 million as at 31 December 2018. The collection period was 53.1 days as at 31 March 2019 compared to 47.4 days as at 31 December 2018, mostly due to revenues and the collection periods associated with certain Middle East accounts.

Total non-current assets increased to Baht 14,547 million as at 31 March 2019 from Baht 12,648 million as at 31 December 2018, mostly due to Baht 1,900 million Other long-term investments in bonds and debentures.

Total current liabilities were Baht 3,087 million as at 31 Mach 2019, an increase from Baht 2,878 million as at 31 December 2018. The variance was mostly due to Baht 227 million additional Corporate Income tax payable associated with 1Q19 taxable operating profit.

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Non-current liabilities were Baht 3,131 million as at 31 March 2019, an increase from Baht 3,126 million as at 31 December 2018.

The Company's Interest coverage ratio improved to 51.6x in 1Q19 from 37.7x in 1Q18, due to less interest expense associated with the Baht 1,000 million repayment of the Series 2 debentures in December 2018.

Total shareholders' equity grew to Baht 19,812 million as at 31 March 2019 from Baht 18,744 million as at 31 December 2018. This increase resulted mostly from the Company's 1Q19 Net profit of Baht 1,081 million. Average return on assets (ROA) was 17.0% in 1Q19, compared to 17.2% in 2018. Average return on equity (ROE) was 22.4% in 1Q19, compared to 23.4% in 2018.

Unit: Baht million	31-Mar-19	31-Dec-18	Change
Total assets	26,030	24,749	5.2%
Total liabilities	6,218	6,005	3.5%
Total shareholders' equity	19,812	18,744	5.7%

	1Q19	1Q18
Interest coverage ratio (x)	51.6*	37.7*
	1Q19	2018
Average collection period (days)	53.1	47.4
Average inventory period (days)	14.3	13.6
Average payables period (days)	28.2	29.9
Net debt to equity (x)	0.0	0.0
Average return on assets (%)	17.0%	17.2%
Average return on equity (%)	22.4%	23.4%

*After adding back the 1Q19 and 1Q18 capitalized interest expenses related to the campus expansion.

Cash flow statements

The Company's Net cash flows from operating activities in 1Q19 were Baht 1,663 million, compared to Baht 1,523 million in 1Q18. This increase was mainly due to Baht 254 million less in Inventories and Baht 200 million less in Trade and other receivables, offset with Baht 325 million less in Trade and other payables. Net cash flows used in investment activities were Baht 2,294 million in 1Q19 compared to Net cash flows from investment activities of Baht 232 million in 1Q18. This variance was mainly due to Baht 1,900 million Other long-term investments in bonds and debentures; Baht 466 million change between Short-term investments and Cash and cash equivalents; and Baht 80 million investment in an associated company. The Company reported Net cash flows used in financing activities of Baht 16 million in both 1Q19 and 1Q18. As a result of the above, Cash and cash equivalents was Baht 1,880 million as at 31 March 2019, compared to Baht 4,209 million as at 31 March 2018.

The Company's Liquidity ratio as at 31 March 2019 was 3.7x compared to 4.2x as at 31 December 2018, while the Quick ratio as at 31 March 2019 was 1.4x compared to 1.8x as at 31 December 2018.

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Unit: Baht million	1Q19	1Q18
Net cash flows from operating activities	1,663	1,523
Net cash flows (used in) from investing activities	(2,294)	232
Net cash flows used in financing activities	(16)	(16)
Net (decrease) increase in cash and cash equivalents	(649)	1,739
Cash and cash equivalents at end of period	1,880	4,209

	31-Mar-19	31-Dec-18
Liquidity ratio (x)	3.7	4.2
Quick ratio (x)	1.4	1.8

Subsequent Event

On 5 April 2019, The labor Protection Act (No. 7) B.E. 2562 was announced in the Royal Gazette. This stipulates additional legal severance pay rates for employees who have worked for an uninterrupted period of twenty years or more, with such employees entitled to receive not less than 400 days' compensation at the latest wage rate. The law is effective from 5 May 2019. This change is considered a post-employment benefits plan amendment and the Company has additional long-term employee benefit liabilities of Baht 144 million as a result. The Company will reflect the effect of the change by recognizing past service costs as expenses in the income statement of the period in which the law is effective, which in the second quarter of 2019.

Please be informed accordingly.

Yours faithfully,

(Mrs. Linda Lisahapanya)

Managing Director

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