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    GHP   SE0002579912

GHP SPECIALTY CARE AB (PUBL)

(GHP)
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GHP Specialty Care publ : Interim Report January - June 2020

07/10/2020 | 02:11am EDT

Quality through specialisation

Swift adaptation to manage the pandemic gave results

  • Revenues decreased in the quarter due to Covid-19

  • Positive quarterly results owing to adaptation in the businesses and cost-cutting measures

  • Vårdsamverkan's best quarterly results so far

  • GHP has supported the care of Covid-19 patients with staff, materials and equipment

Second quarter 2020

  • Sales revenues amounted to SEK 317.0 million (335.7)

  • Organic growth amounted to -8.2 percent (15.8)

  • EBITDA increased to SEK 45.2 million (38.1)

  • EBITDA margin increased to 14.3 percent (11.4)

  • EBIT increased to SEK 20.5 million (17.1)

  • EBIT margin increased to 6.5 percent (5.1)

  • Result after tax amounted to SEK 11.5 million (12.7)

  • Result per share amounted to SEK 0.13 (0.17)

First half 2020

Sales revenues increased to SEK 700.0 million (666.1)

  • Organic growth amounted to 1.7 percent (16.5)

  • EBITDA increased to SEK 99.4 million (80.3)

  • EBITDA margin increased to 14.2 percent (12.0)

  • EBIT increased to SEK 50.4 million (38.5)

  • EBIT margin increased to 7.2 percent (5.8)

  • Result after tax amounted to SEK 34.6 million (27.9)

  • Result per share amounted to SEK 0.43 SEK (0.35)

Sales revenues, rolling 12 months SEK millions

1 400

1 300

1 200

1 100

1 000

EBIT, rolling 12 months SEK millions

80

73

75

60

72

900

40

800

700

20

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Segment summary

Sales revenue

Operating result (EBIT)

Second Quarter

Second Quarter

Sek millions

2020

2019

2020

2019

Nordic region

262.5

276.9

21.2

22.8

International

26.5

25.5

5.0

8.4

Vårdsamverkan

28.0

33.3

3.6

-2.4

Other

0.0

0.0

-9.3

-11.6

Total

317.0

335.7

20.5

17.1

Items reported as Other are attributable to Parent Company functions. For more information on the Parent Company's results, please refer to page 17.

Examples of how GHP has been supportive in the care of Covid-19 patients

  • Let out staff to the public healthcare: Closed parts of our regular business in Stockholm to instead lend anaesthesia, intensive care and other medical staff to the public sector hospitals. Staff from halted business has supported geriatric care in Stockholm. Completely halted business in Denmark for a few weeks as the public sector wanted access to our resources.

  • Supported the public healthcare with drugs: Stopped using Propofol (anaesthetic needed in intensive care), given Propofol to intensive care. These has been possible due to the transition to alternative anaesthesia methods and drugs.

  • Served patients outside of our ordinary scope: Treated prostate cancer patients queueing for Karolinska. Taken care of subacute orthopaedics for Västra Götaland. Investigated suspected cancer patients in Skåne.

  • Supported international healthcare to cope with Covid-19: At SKMCA in the UAE the number of intensive care places has been greatly expanded and we are the primary hospital for covid care in the northern part if the country. In Kuwait, Kuwait Hospital now cares for mainly paediatric patients coming from public hospitals so that there are more places for covid patients there.

  • Supported insurance companies: Supported insurance companies in medical issues related to Covid-19.

  • Temporarily stopped appointments with risk-group patients

CEO's comments

This spring has placed great demands on our business, where rapid action and adaptation have been necessary. As a health care Group, GHP has had to manage the consequences of the pandemic at close quarters. In the Nordic Region we have lent personnel, material and equipment to the public hospitals at the same time as we have had to cancel the appointments of all risk-group patients. In International we have adapted to almost only taking care of Covid-19 patients in the UAE and in Kuwait the hospital is now temporarily a paediatric hospital. Furthermore, in some parts of the business we have been forced to furlough members of staff, temporarily reduce new employment levels and terminate consultants. Even though this has been tough, it has been incredibly pleasing to see the commitment and ability of all our employees, who in our decentralised organisation have made these rapid changes work fantastically well.

Normally we would not have been able to manage a loss of sales of this magnitude in such a fine way and extraordinary efforts have been necessary on the part of our employees. There are many positive things from the swift adaptation and the commitment that we can take with us into the future but we need to return to our normal demand to achieve a sustainable level of profitability. There is a lot indicating that this will be the case as early as after the summer holiday, when the staff we have lent will probably come back.

In the Nordic Region the lending of anaesthesia staff to public health care has created a large imbalance in which professional groups we have available at the same time as fewer people have sought care and we have cancelled risk-group appointments. Furthermore, our business in Denmark was forbidden from operating on patients for a while. We have managed this by reducing our costs at the same time as we have taken on new, more relevant assignments such as cancer surgery and geriatrics. During the second half of the quarter we experienced a certain recovery.

In International the hospitals in the UAE and Kuwait have adapted their businesses in an exemplary manner so as to be able to support society during the pandemic. In Ajman most of the health care has focused on managing Covid-19 patients and in Kuwait the scaling up of the hospital has been put on hold in order to instead support the public sector in the form of a paediatric hospital. This means that our revenues will be lower for a period but these important efforts strengthen GHP's position in the region over time.

Vårdsamverkan's positive contribution has been extra clear this quarter. The segment improved its results in the quarter, based on a combination of the fact that lesshealth care is purchased as a result of Covid-19, but also because the work of analysing and improving the care chains is bearing fruit. Moreover, in several parts of the Group we have been able to take advantage of the technical solutions that Vårdsamverkan has developed. During the pandemic the knowledge in Vårdsamverkan has been used to accelerate the use of digital care meetings at our clinics.

Even though the second quarter has largely been characterised by the ongoing pandemic, we have continued to work on business development in all three of our segments, and this has worked surprisingly well. We see increased opportunities to grow in new markets, with new collaboration and with new clinics. We experience that there is great demand for the services and the models we offer and therefore our investments in business development are important even when society faces tough challenges.

We have an intensive quarter behind us and we are prepared for the fact that we have a period ahead of us that will mean a lot of hard work. The way that our organisation has handled the situation during the second quarter convinces me that we will also be able to adapt to manage coming challenges and opportunities very well. Have a good summer and stay safe!

Daniel Öhman, CEO

Nordic Region

In several areas GHP has supported public health care during Covid-19.

Most of the clinics have had lower revenues as a result of Covid-19 but all clinics have adapted to manage the effects of the pandemic. This has resulted in us being able to reduce the segment's costs and the segment's results being positive in the period.

During Covid-19 a considerable health care debt has built up in society and this will need to be managed when the situation becomes more normal again.

International

The hospitals in the UAE and in Kuwait have been adapted to support society during the pandemic.

Halved revenues in Kuwait in Q2 and Q3 as a result of GHP's normal work in Kuwait being limited due to Covid-19.

The change in the reporting of revenues in the UAE that was made in 2019 had a negative effect of SEK 6 million on results for the quarter compared with the corresponding period the previous year.

The work on business development is ongoing and during the quarter has focused most on a potential diabetes business in Saudi Arabia.

GHP Specialty Care AB 556757-1103

Interim report January-June 2020

2

Financial summary for the second quarter of 2020

Sales revenues

Sales growth amounted to -5.6 percent (16.7) for the second quarter and to 5.1 percent (17.6) for the half year, of which organic growth was -8.2 percent (15.8) for the second quarter and 1.7 percent (16.5) for the half year.

Operating result

The operating result before depreciation and amortisation for the second quarter of 2020 increased to SEK 45.2 million (38.1), corresponding to an EBITDA margin of 14.3 percent (11.4).

The operating result after depreciation and amortisation amounted to SEK 20.5 million (17.1) for the second quarter of 2020, corresponding to an EBIT margin of 6.5 percent (5.1), and to 7.2 percent (5.8) for the half year.

Net financial items

Net financial items amounted to SEK -1.8 million (-0.4) for the second quarter of 2020 and to SEK -3.6 million (-1.9) for the half year.

Income tax

The tax expense amounted to SEK -7.1 million (-4.0) for the second quarter and to SEK -12.2 million (-8.7) for the first half year.

Result for the period

The result after tax for the second quarter of 2020 amounted to SEK 11.5 million (12.7), of which SEK 9.0 million (11.3) was attributable to Parent Company shareholders. For the first half of 2020 the corresponding figure was SEK 34.6 million (27.9), of which SEK 29.6 million (23.6) was attributable to Parent Company shareholders.

Reflections on Covid-19

The Covid-19 pandemic had a negative effect on GHP's revenues for the quarter. Management's assessment is that the need for health care services will increase as a result of Covid-19 but demand may decrease, however, in the short term.

During the period when Covid-19 has a significant impact on society, activity in GHP's clinics may both increase and decrease. The unpredictability that arises in connection with the pandemic leads to rapid swings in volumes, which means that it becomes more difficult to maintain efficiency at the clinics. GHP is actively working on reducing any negative financial effects at the clinics by adapting the clinics' cost base in those cases where business activities decrease. This is done, amongst other things, by hiring out personnel to publicly run hospital health care. GHP has also taken advantage of the support package that was introduced by the governments in Sweden and Denmark, for example short-term furlough support and reduced employer's social security contributions.

Covid-19 is not assessed to have impacted the long- term value of GHP's assets. Most of GHP's customers are public organisations and large insurance companies, which means that the risk of future credit losses is assessed to be low. In GHP's assessment there is no impairment requirement for the Group's assets as a result of the coronavirus.

Current and non-current interest-bearing liabilities

At 30 June 2020 the company had utilised credit of SEK 360.2 million (259.6). Of this figure, SEK 64.6 million (67.0) is current liabilities and SEK 295.6 million (192.6) non-current liabilities.

Cash flow and financial position

There was a positive cash flow of SEK 116.9 million (-18.9) for the second quarter of 2020 and of SEK 161.1 million (-15.9) for the half year.

The cash flow from operating activities included changes in working capital of SEK 36.2 million (-3.0) for the second quarter of 2020 and of SEK 36.1 million (-18.1) for the half year.

The cash flow during the second quarter was affected, amongst other things, by the fact that other interest-bearing current liabilities increased by SEK 58.7 million due to respite on payment to the Swedish Tax Agency. Investments in hospital equipment of SEK 0.6 million were made, as well as investments in office equipment of SEK 2.4 million.

The Group's cash and cash equivalents amounted to

SEK 186.7 million (16.1) at 30 June 2020. In addition, the Group has been granted credit of SEK 70.0 million by a bank but this credit is as yet unutilised. GHP has a controlling interest in all cash-generating subsidiaries.

Net loan debt amounted to SEK 173.5 million (243.5) at 30 June 2020. All covenants were met during the period.

Personnel

The average number of employees for the first half of 2020 amounted to 726 (635).

3

GHP Specialty Care AB 556757-1103

Interim report January-June 2020

Segment summary

Nordic Region

In the Nordic Region GHP runs 22 specialty care clinics in the fields of orthopaedics, spine surgery/spine care, obesity surgery and diabetes care, gastroenterology, urology, general surgery, arrhythmia, sports medicine, neurology, skin and specialist dentistry. The businesses focus on quality, continuity, development and efficiency and it is our conviction that this stems from a high degree of specialisation. The clinics' customers consist of County Councils/Regions, insurance companies and to a certain extent private individuals. In the Nordic Region GHP has one clinic in Denmark and the other businesses are in Sweden.

.

During the quarter most of the clinics had lower revenues as a result of Covid-19. The reason for the decrease is that several clinics did not admit risk-group patients and that the clinics' resources were hired out to support the public health care sector. The clinics in Stockholm and Copenhagen were the clinics mostimpacted by Covid-19 during the second quarter. During the second half of the quarter we experienced a certain recovery in patient volumes.

All the Nordic businesses adapted to manage the effects of the pandemic. This resulted in the segment's costs being able to be lowered and in positive results for the segment in the period. Despite the negative organic growth in the quarter, the Nordic region managed to maintain the operating margin at the same level as the previous year.

As private and public sector health care providers cut back planned care during Covid-19, a considerable health care debt has built up and this will need to be managed when the situation becomes more normal again. This means that demand for the health care that GHP provides is assessed to be high in the longer term.

Seasonal variation

GHP's business is affected by seasonal variation, in particular round about the summer holiday. As most of the Group's clinics do not carry out any surgical procedures at all during a few summer weeks, sales, the operating result and cash flow are affected negatively during the third quarter. The clinics are closed during this period due to the fact that it isinefficient to run a clinic at half capacity as certain economies of scale are lost. It is also the case that the demand for operations is considerably lower during the holidays as many people do not want to have recently undergone surgery during the holiday.

GHP Specialty Care AB 556757-1103

Interim report January-June 2020

4

International

The International segment conducts business in the United Arab Emirates (UAE) and in Kuwait.

GHP has conducted diabetes care at a clinic in the UAE for a number of years but during 2016 GHP expanded its business operations after having won a procurement process at the end of 2015. The procurement process comprised a management contract for the diabetes clinic, two accident and emergency hospitals and a paediatric and obstetric hospital. The hospitals' assets and employees remain under hospital management and

GHP's company in the UAE only employs the hospitals'

Group management. Through this Group management, GHP will run the hospitals with the aim of improving both their quality and efficiency.

On 17 June 2019 GHP signed an agreement with Kuwait Medical Center Holding Company (KMCH) whereby GHP is the operator of Kuwait Hospital in Kuwait City. The agreement runs for five years as from 1 July 2019 and can be extended. The agreement means that GHP is taking yet another step towards becoming a leading hospital operator in the Middle East.

During the second quarter of 2019 GHP made a change in how revenues from the management contract in the UAE should be managed over a one-year cycle. Thechange means that revenues from the management contract are divided more evenly over the year and reflect the point in time when GHP carries out the services. The change does not impact revenues or results on a full-year basis but the fourth quarter contains a smaller percentage of revenues and results for the year compared with previous years. The impact of this change on revenues and results for the second quarter of 2020 is SEK -6 million compared with the corresponding quarter the year before.

During the quarter the hospitals in the UAE adapted their business to focusing on managing Covid-19 patients. This has worked very well and has been met with great appreciation by society in Ajman.

During the second quarter the intended scaling up of the hospital in Kuwait was by and large put on hold. The hospital has instead been temporarily adapted to be used as a paediatric hospital. As GHP's normal work cannot proceed during the pandemic, GHP's remuneration in Kuwait was halved during the quarter, which impacted revenues by approximately SEK -5 million in the quarter. The lower level of remuneration will also be applied during the third quarter.

GHP's work on business development in the region is ongoing, where the development of models for diabetes care in Saudi Arabia had high priority in the quarter. However, some of these processes are impacted by the travel restrictions that the corona situation entails.

5

GHP Specialty Care AB 556757-1103

Interim report January-June 2020

Disclaimer

GHP Specialty Care AB published this content on 10 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 July 2020 06:10:00 UTC


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Sales 2021 1 519 M 175 M 175 M
Net income 2021 65,4 M 7,55 M 7,55 M
Net Debt 2021 186 M 21,5 M 21,5 M
P/E ratio 2021 28,7x
Yield 2021 1,84%
Capitalization 1 884 M 217 M 218 M
EV / Sales 2021 1,36x
EV / Sales 2022 1,24x
Nbr of Employees 791
Free-Float 42,6%
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Last Close Price 26,80 SEK
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Spread / Average Target 11,2%
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Managers and Directors
Daniel ÷hman Chief Executive Officer
Carl Philip Delborn Chief Financial Officer
Carsten Nils Erik Browall Chairman
BjŲrn Zoega Chief Medical Officer
Predrag Mitic Manager-Information Technology
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