I must advise you that this conference call is being recorded today, 24 February 2022. I would now like to hand the call over to your first speaker today, Ms. Penelope Koh from Investor Relations at IHH. Please go ahead, Ms. Koh.
Thank you. Good morning, and thank you for joining us today. I'm Penelope Koh from IHH Investor Relations. With me on the call this morning are Dr. Kelvin Loh, our Managing Director and CEO, Mr. Joerg Ayrle, our Group CFO. We also have our colleague, Arun, who is the Head of Strategic Planning and Investments from Acibadem, with us on the call today. For all of those on the webcast, you will be able to view and download our presentation slides, press release, as well as our audited financial statements. These materials are also available for download on the IHH website. As for the sequence of the event, Dr. Loh will first touch on key highlights for the fourth quarter and full year 2021. Joerg will then share more on our financial performance before Dr.
Loh closes with the operational highlights, strategy and outlook for the group. Then thereafter, we'll move on to Q&A after the presentation. With that, I'll turn the call over to Dr. Loh. Dr. Loh, please.
We had a strong year. I want to thank our frontline staff who have worked so hard to keep patients safe, treating both non-COVID and COVID patients through another challenging pandemic year. I thank our leaders who have delivered on operational synergy and steered the group through a turbulent time. Most importantly, I'm very grateful to our patients who continue to trust their lives and health with us. Because of them, it's been possible for us to deliver strong financial results. You can see here on slide 4, we had a very strong Q4 and also a full year 2021 performance across all key metrics. For the quarter ending December, the group's net income and net operating income increased 8% and 19% respectively.
For the full year of 2021, net operating income more than doubled to MYR 1.6 billion on the back of a stronger EBITDA at lower finance costs. As we head into our tenth year as a listed company, we will deepen the trust that we have built with our patients and community. We will embark on a new chapter in our journey, which I hope to give you a sneak preview about later on. For now, let me hand over. First, have Jeorg take you through our financial highlights.
Thanks a lot, Kelvin. Welcome and good morning, everybody. We had a great analyst dinner yesterday evening. For those of you who couldn't join, we'll be back here and KL and also in Singapore and organize more of that. It was a great information sharing with the team there. Always good to be in touch. Thanks a lot for joining. Financial performance Q4. We have a strong year. That's very clear. We have a 19% growth quarter year-over-year in Q4 to MYR 4.5 billion in Q4. That is a 19% growth for the year. We have a whopping 28% growth to scale to above MYR 17 billion in revenue for the year.
EBITDA is above $1.1 billion at 25% EBITDA margin. That is a 7% up. For the year, we are now well above $1 billion in EBITDA. That's a really new basis for the company to grow from. You will see a lot of what Kelvin is gonna present around the strategy going forward that is really based on this very solid, very strong new level of performance. If you look here at the EBITDA margin pre-COVID, we were 21%-22%, then it was a bit choppy, and we're now pretty consistent, 200 BPS above that, in the range of 24%-25%. I think this is a range we feel pretty comfortable with.
10% net income, operating net income at MYR 440 million, 19% up. For the year, we have MYR 1.6 billion operating net income, and we have MYR 1.9 billion reported net income. That is an amazing growth from prior years and signifies a strong return on equity. If you go to the next page, you see this a little bit clearer quarter-over-quarter on page 7. I think everybody has the documents, right? So on this page, 19% growth to MYR 4.5 billion, MYR 453 million net income reported. I guess performance is strong across all markets. Especially Europe continues to really outperform us.
Very clear signal that during a time of crisis, the organization is able to manage this very well and gain market share and quality of earnings in their markets. We see very strong Singaporean business, especially around working together with the government to fight the Omicron surge in Q4 during this period. Patients are coming back. We see that, especially in Malaysia, where we have a clear uptake in bed occupancy rates in inpatient visits. Singapore is a bit lower, so we are still waiting for the market to open up. FX has been managed very well. The FX cross-currency swaps are efficient against the interest-bearing debt.
The only open point we have is one particular rent contract in a hospital in Maslak, in Turkey, that is still denominated in U.S. dollar that we have not protected against. We still have some FX headwind, but that's the only leakage we have here. I'm super happy to announce that our financial reports here in Q4 are audited financials. This is a first for the company to come out end of February with that. I think we're one of the very few companies here in Malaysia and Singapore who can do that, and it's a really great sign of collaboration in the team and to bring out a quality, transparent reporting at an earlier time. If you look at the net debt page, very clear signal of further deleveraging.
We have now a net debt of MYR 5.8 billion, very strong cash performance. Capital expenditure fully under control. I think we'll see in the coming year a little bit more relaxing on CapEx. I think we have a couple of things we need to do more on this. You will see the dividend page in a minute. If you look at the next page, capital efficiency, return on equity is now at 8.4%. We have ROCE of 8%, a very strong uptick with the improvement of our underlying EBIT. Net debt to EBITDA further deleveraged 1.37. Net debt to equity, 0.21. I think you all recall the messaging we make out of this perpetual that is upcoming.
We will refinance that with basically cash on hand and a couple of credit lines we have. That is gonna bring net debt up a little bit, but reduce and save us around $15 million in cash outlays for the perpetual cost. I think it also shows that we have a really strong balance sheet for growth. Not only organic growth, that is the key focus areas around our clusters, drive bed occupancy rates, expand organically, a very important factor, but also to drive a new M&A strategy that we're gradually guiding to. Dividend has seen a clear uptick, a step up from MYR 0.04 to MYR 0.06.
That's a 50% increase in dividend, and it's a sign that we do believe that we've reached a new level of performance. That's a 28% payout. We are not selling the house away here. We are still very prudent in terms of the payout ratio, but we really feel that the underlying earnings have improved. We're now at MYR 0.06. We believe this is very sustainable dividend. We did want to let shareholders participate in success that our healthcare colleagues in the front line have done for us and provided for us over this period. Now, looking a little bit ahead on the next page 11, and you've heard me say that before, I think it's important to note that we are really happy with the performance.
We really feel very confident that things will develop smoothly and will continue to grow. There is inflation, there is a tight labor market, staff cost pressures are there. Retention of healthcare professionals is not as easy as it used to be. We see that the COVID-19 impact is gradually going away. In Malaysia, you already saw from 28% of revenue down to 8%. I think Singapore still has a strong COVID contribution, but we see that there is a slowdown in that. Of course, the foreign patients will come back and we believe this will overcompensate any melt off. Whether the timing is really synchronized is another question.
I think while we are positive for the year 2022, we still want to be cautious and say, "Okay, we need to manage through the challenges and issues." With this, I'd like to pass back to Kelvin.
Continued patient volume growth. Recently, after almost two years, I had a chance to now restart my travel. I visited Malaysia. I visited Turkey. What really amazes me is that our staff on the ground in different markets far away from us may be disconnected because of travel disruption, but continue to work hard, keeping patients safe, building up their trust, and therefore, I think that's why you can see that continued persistent recovery through the pandemic. Some of these volumes are still COVID-19 volumes, but I think it's fair to generalize and say that the return of our non-COVID patients or business as usual is continued to persist and be strong because of what our staff do. Now, in Singapore, you can see that it appears that the volume has dropped.
That actually is on the back of the Q in Q4 2020, when there was a fair bit of COVID as well as non-COVID-19 admissions. At that point in time, the government policy was to admit COVID-19 patients who are not actually severely ill, and that's why the revenue intensity wasn't that high as well. Now, conversely, coming to Q4, Jeorg had mentioned that there was a spike in COVID-19 patients in Q4 2021. By this point in time, the admissions policy had changed, and it was really on the sicker patients, for example, those who are breathless or those who are going to ICU, who are getting admitted to hospital to conserve hospital beds.
That's why you can see the volume is not so high, but instead the revenue intensity much higher, growing by 17.5%. As we go forward, I expect that this. It may be bumpy, the ride, but this continued recovery of non-COVID-19 volumes will continue. We have high vaccination rates, and we are hopeful domestic volumes will continue to grow. And we are hopeful also for foreign travel to return in markets where it has not yet. On slide 14, going to Malaysia. Malaysia operations saw good recovery on higher inpatient volumes. You can see from that strong growth from Q3 going to Q4, there was some easing of movement controls towards Q4, but also again, kudos to the team for keeping in touch with patients, and therefore, having that elective patient load come back in.
EBITDA grew 28% to MYR 223.2 million. Inpatient admissions increased 12%. Revenue intensity grew 8.3%. Bed occupancy also increased to 52%. On slide 16, Singapore. Overall performance was still resilient despite that lower inpatient admissions. I had mentioned there was a spike up in Q4 2021 of COVID-19 cases, but because of the policy, there were smaller numbers of COVID-19 cases admitted, but the more sicker one. On the flip side then, because of the COVID-19 wave in Q4, the elective patients saw some deferment as well. The average occupancy was at 53% for Singapore. Now, in Singapore, as we go forward, we expect COVID-19 services to actually fall off. Singapore is going towards a full endemic type situation.
There'll be lesser social distancing controls. We also expect more travel to come back. Therefore, we expect there'll be some inflection in the revenues for Singapore, I think over the course of Q1 and Q2 this year. We do expect that the non-COVID-19 businesses come back over the course of this year. We're also expanding beyond our hospital business. Proud to announce that we are building a one-stop ambulatory medical center at The Woodleigh Mall, and we expect to open that in 2023. Next slide on Turkey and European operations. You can see here daily profits being maintained. Revenue improved 17% to MYR 1.1 billion. EBITDA increased 14% to MYR 318 million. Volume grew. Inpatient admissions increased 21%.
In Turkey and European operations, clearly there's that continued growth, when I was in Turkey two weeks ago, I can see our hospitals are really full. Average occupancy is running at over 80%, which means that on a weekday basis, we are close to max capacity, often running at 100%. Because of that, very timely, Istanbul is one of our great clusters, and we therefore will expand in that cluster. We are looking forward to our opening of our next hospital there, which is in Ataşehir on the Anatolian side to complement our really very successful Tuzla hospital. That's a 180-bed hospital that we should open by Q3 this year.
Slide 19 gives you more color with regard to our currency mix of the revenues in our Turkey and European operations. For the whole year of 2021, non-lira currency, largely euros, made up 41% of Acibadem's total revenue, that was comprising 13% from foreign medical travel to Turkey and 20% from our European operations. Because of this, with the rising inflation, we expect to mitigate higher costs for our operations. We expect to be able to put in needed pricing adjustments, and we attract more foreign patient revenues as well. On slide 21, you can see a healthy recovery of COVID-19 inpatients for India operations. Revenue grew by 19% to MYR 948 million. Particularly it was the non-COVID-19 admissions that drove this.
In fact, there was really a relatively small contribution of COVID-19 during that time. Now, of course, as we got into Q1 then, the Omicron wave came about in India, and it created a new dynamic. As always, our team in India are able to pivot and switch between the COVID-19 waves and still handle it well. Q4, inpatient admissions increased 15%, revenue intensity increased by 3.4%. For the quarter, average occupancy was 68%. On slide 23, very happy to announce Gleneagles Hong Kong maintained its positive momentum in the past quarter after achieving EBITDA breakeven in May 2021. Revenue increased 23% to MYR 195.2 million. The positive EBITDA was sustained, and in fact, improved to MYR 2.4 million.
Inpatient admissions increased 16%, while revenue intensity also increased by 6.5%, and average occupancy was at 65%. For our China operations, happy to share Parkway Shanghai is slated to open also in Q3 of 2022. Since I came on board, I've been sharing about our vision to become the world's most trusted healthcare service network. We have held on to that vision across the whole COVID time. Our staff have taken the whole pandemic in their stride, helped governments fight the war, and also continued to deepen clinical capabilities, whether it's separating conjoined twins in Acibadem or doing bilateral hand transplants in India. We continue to build that trust with our patients. We will stand firm to our purpose of touching more lives and transforming care for the better.
Our steadfast anchoring to our vision has stood us well. It's delivered here, our financial improvement in our financial metrics, return on equity, strengthen our balance sheet. Cash flow is very strong now. Our net debt to EBITDA has reduced. In fact, our return on equity has tripled from 2.8% to 8.4% from March 2020 to December 2021. Now, of course, even if we try to normalize it and remove the COVID effect, that's still strong. We think it's probably still in the region of 5%-6%. We're in a very strong position. I see this as a springboard year as we enter into 2022, positioning us for our new growth journey, where we'll have five growth engines. We'll recover from COVID-19.
Beyond that, we will have strong organic growth. We have fit to fill in all the clusters that we are in, and then that is capital efficient growth. Now, beyond that, our balance sheet now positions us for a new phase of M&A. We will acquire more strategic assets. We'll develop our laboratory platform and grow that strongly. We will innovate and drive digital transformation. Even as we do so, our purpose will remain the same, to touch lives and transform care. In 2022, as we celebrate our tenth year anniversary, we will embark on a journey to do this even better, so that the choices we make for the growth that we seek will continue to be guided by that same true north to build trust by doing good for our patients, planet, and the communities we serve.
We will always provide care for good. Care means we will double down on the care and health care. For good, not only means doing good, but forever. Because we will always anchor our journey on trust building for our patients. We will provide excellent clinical care. We will provide excellent service. We will step up our ability to be more transparent in pricing and the value that we provide to our patients. We continue our synergy journey, leverage our operating scale. For example, in IT, we introduced a common HIS platform, intellectual property that we own across Turkey and Malaysia, and soon to be now for Singapore. Our group procurement savings surpassed our MYR 100 million target that we set last year, and this year we'll set another MYR 100 million of savings as our target. We now also we'll deliver strong growth.
I talked about our growth strategy, not just the one or two, but all five growth engines that I had mentioned. Most importantly, the fourth pillar here, this will be all sustainable as we double down on care with a compelling sustainability agenda. The care for patients, the care for people, the care for public, and care for our planet even better. In summary, our focused execution on our previous strategy has allowed us to drive a strong recovery from the pandemic. We've built trust with the markets we are in. Now, as we recover, there clearly will be some shorter headwinds. We talked about the COVID-19 services taper off, and because of that inflection, continue the domestic recovery and foreign patients returning, there could be some inflection point as we go through Q1.
Clearly the long-term mega trends driving our business remain intact. We will ride this trend. As we mark our 10th year anniversary as a listed company, we will enter into a next phase of our journey, a new phase of growth. This growth will be strong and sustainable because we will provide care for good. Our growth strategy will have 5 growth engines anchored on the same true north to build trust. We will continue using our operating scale and synergy of our global network to make healthcare better. All this will be underpinned by a compelling sustainability agenda. I'm very excited to look forward to share more with you over the coming quarters on this new strategy. For now, thank you so much, and we'll take questions. Penny, please.
Thank you, Dr. Loh. We'll now take your questions. I would like to request for each participant to keep it to two questions. If you have more questions, then you may rejoin the queue after. With that, operator, please proceed with the Q&A. Thank you.
Thank you.
Operator, would you like to prompt the participants to ask the questions? Thank you.
Sure, thank you. Audio participants place questions to pools. lease press star zero one on your telephone keyd. You will be placed on a queue. To cancel the queue press star zero two. Once again, zero one on your telephone keypad now. First, we have Sean Qu from RHB. Please go ahead.
Hi. Thanks for taking my question, and congratulations on a good set of results. Yeah. My first question is on the inpatient case mix. With regards to that, are you still seeing a high proportion of severe cases, or could we expect the revenue intensity we see right now be the new baseline going forward?
Thanks, Sean. I take it that you're referring to the Singapore experience in Q4?
Not just in Singapore.
Generally.
I understand that's mostly COVID. Yeah, but generally.
Oh, I see. Okay. Well, the broad answer to that is we look across all our markets. It's all the experience is all different. In India, what you see is a really largely business as usual for Q4, for example. Even in Malaysia as well, the COVID admissions were already relatively low, but I'd say that's already coming back to usual. Now, it is true that in these markets where there already was that fall off of COVID-19 admissions, there could still be a deferment of the smaller elective cases. Could argue that that higher revenue intensity in some of these situations is still because there are these particular patients come, right?
If you do see that, there are in Malaysia, for example, for quite some time, through the COVID-19 period, there is smaller activities, but we saw a high intensity that may start to normalize somewhat. I would also say that it's been 2, 3 years now since, definitely more than 2 years since COVID-19. Over this time, as a general point, our hospitals, in any case, have been increasing case mix, deepening clinical capabilities. You will see that, counter effect coming to play as well. Now, in Singapore, I mentioned that anomalous effect of Q4. I think that is unlikely to be sustained in that way. That was really due to a spike of the very ill COVID-19 patients being
Does that help?
Yep, that's great. Second question. Could you elaborate further on your ambitions to grow your diagnostic segment, as you mentioned? And can we expect separate disclosure in your upcoming annual report for future quarterly financials?
Thank you so much. I'll answer the business question I asked. I would be able to talk about how we want to report it. Absolutely a very exciting book of business. Actually, it's not a new business for us. We have operated laboratory business for more than 30 years, easily. We have the largest lab business by revenue in Malaysia, Singapore, and Turkey. Via Fortis, we own SRL, Fortis owns SRL, which is one of the largest lab players.
We see phenomenal growth for laboratories going forward, firstly driven by the trend, that industry-wide trend that medical science is simply providing more and more tests which are non-invasive and yet able to help people, all of us actually, to manage our health better, diagnose illnesses earlier, more accurately diagnose ourselves such that we can get a precision medicine. That's the next explosion of such tests which will drive growth. Plus, of course, a heightened desire by the healthcare consumer to understand more about their health. Of course, given our deep capability, we see ourselves not just as a routine laboratory service provider, but really one with deep clinical know-how and capabilities. We think we are extremely well-positioned to then develop, grow this as a global business.
We do expect strong growth. In fact, it has lower capital requirements, higher return on equity, and actually it probably is even stronger growth trajectory than business within hospital.
Yeah. Thanks. Thanks, Kelvin. We've guided to this topic on segment reporting before. I guess the question that we are debating at the moment is whether we report this as purely an overlay to our existing segments so that, because this is a matrix, right? The businesses are currently embedded in the respective segment of disclosure in Singapore, Malaysia, Turkey, Europe, and India. So do we report it as an overlay but leave the underlying numbers in the existing segment? Or do we completely take them out of the existing segments and report labs as a completely independent standalone segment? I wanna have a look at how it would look and if it would be good in explaining.
I would be very happy to get input from the analysts, what you would like to see. I'm sure Penny would be happy to get input from you. What I can tell you is that we had MYR 2 billion in lab revenue in 2021. MYR 510 million of that was in Q4. Very strong margins above what our average margin is. We'll get to that disclosure in Q1. But yes, we will have a segment disclosure.
Got it. Thanks.
Thank you. Next question is Rachel Tan from DBS. Please go ahead.
Hey. Hi. Morning, Dr. Loh, and Jeorg Ayrle and Penny. Congratulations on your very good set of results. A few questions from me.
Thank you, Rachel.
I think the first is on inflationary pressures. What are your thoughts about price adjustments? If you could give us some color across the different markets, that would be great.
Inflation is, I think it's a key topic for not just us, but most businesses as we enter into 2022. I guess the headline inflation for many other countries that we operate in are at highs which we have not seen for many years now. In Turkey particularly, it's a high inflation environment. I think, headline inflation was something like actually 40% in Turkey. Rest of the markets are also clearly higher than what it was before. We do see cost increases in cost of goods. We will mitigate that by our global procurement initiative.
As you can see, we've been delivering on cost saving, even as we go across time, and we set ourselves up for a target of another MYR 100 million of cost savings, regardless of the inflation. I think we will do some mitigation. I'm not sure we can get to all. Now, the other part of it actually is, salary or medical wages inflation. That, I expect, will also be significant, and there'll be some pressure for us. At the same time, you know that we are entering. We will do more business, which is business as usual or not COVID-19 related work, which therefore really means we have to bring back more clinical staff online to service our patients well.
We have to take all this in stride in 2022 and thereby guided through that transiently as the COVID-19 revenues fall off as we get into this inflection. I think we'll see that change through the next 1-2 quarters. Will we be able to overall continue to grow our earnings despite this? My answer is yes because in the end, as volumes come back, as the more complex cases continue to come in, elective surgical procedures come back in, then you'll see our revenues grow strongly organically. In the end, we do see that we'll be able to more than compensate and grow.
Yes, it will be a bit of a headwind in the coming one or two quarters.
Would you be able to give us some sense on the your potential price adjustment?
In Turkey, maybe I'll make a mention of that. We're very proud of how one of our team has been able to achieve operationally despite that high inflation in Turkey. Firstly, they have been able to make the appropriate price adjustments. On a blended basis, we probably came out about 33% price increase in Turkey. Most importantly, the team has been able to keep bed occupancies high, serve patients well, take on complex cases both domestically and overseas. The net result, you can see, is that through the years, we have been able to more than compensate for inflation, and I expect that to be the case as well in 2022 for Acibadem.
Got it. Thanks. My second question is on your ROE. I think ROE has been very strong. Even on a sustainable basis, you're saying that it's the first, already above your five-year target. I'm just wondering what's next for you in terms of ROE and any chance of pegging dividend policy versus your ROE growth?
Yeah, look, I think well noted, of course, made here a major recovery back to, yeah, 8%, above 8% ROE. That's very strong. We've said during the year that the doubling ROE is a waymark and it's not like where we wanna end. We've achieved this. I guess if you look going forward, you might see maybe a little bit of a softening of the ROE. I think the underlying ROE is not 8.4, it's probably a bit less if you take out some of the extraordinary items and other things. Look, it's clear once you're at this level, you need to think about what do other great companies perform at. What are competitors and benchmarks performing at in terms of ROE?
Are we already prepared to commit to you that we will achieve double digit ROE at a certain given time? I don't think we are ready yet to say that, but I think the target is clear. Double digit is possible, and I think that's the pathway going forward.
Okay, great. Thank you so much. I'll jump back in the queue.
Thanks, Rachel.
Thank you. Next question is Nicole Goh from UBS. Please go ahead.
Thanks. Yeah, congratulations, Dr. Loh, York, and Patty, and a great catch up yesterday.
Just two questions from me. I think first of all, Dr. Loh, you mentioned just now about acquiring strategic asset as one of your five growth engines going forward. You know, maybe you could share some color on what you consider a strategic asset and where in which geographical location. Then I think following on from that, I think when you took over in early 2020, there was some talks about how you're gonna try and clean up the company by also disposing of some of your non-performing asset or assets that are not performing as well. Is that still on the cards? How soon can we expect that to take place?
Thanks so much, Nicole. Yes, yeah, you're right. I had announced that portfolio strategy, I think about two years ago now. We called it a cluster strategy. What that meant was that, we look for growth, that's more capital efficient, and so that we can improve our return on equity. I made the case that, if you operate more than one hospital, three, four, better still five, six or more hospitals in any one metro, it's more efficient simply as, synergies of scale of capital. You can invest in the capital-intensive medical equipment and then spread that volume out across multiple hospitals. There's supply chain efficiencies. There are revenue efficiencies because you get to know the doctors well and connect with the insurers well.
It's very clear, and every time we open even if we start a greenfield in a cluster, we are strong, we get to break even typically in less than 12 months. The logic therefore is, when we say what are strategic assets, strategic assets are assets which strengthen our clusters. I think it's not difficult to figure out where these are in our home markets. For example, around Klang Valley, around northern, the NCR region in India, around Istanbul, around Singapore, all examples of strong clusters. We'll look for acquisitions that strengthens that. Beyond that, is it possible for us to look at acquisitions in markets or clusters we're not in or maybe even countries we are not in? I'd say yes, but the same logic applies.
We'd want to see our ability to operate well in those markets. Probably there are ones that are adjacent. For example, some of the European cities where Acibadem has proven to operate well. For example, possibly some of the markets close to our home markets in Asia and close to Malaysia and Singapore. I think they are possibilities, but again, we look for something that it's already where we can see line of sight to having strong return on equity. Now, the same logic then applies with regards to divestment, right?
If we find that we have assets which are not in a cluster that's strong or maybe standalone entities that have lower margins because it simply doesn't have the scale, and we don't see ourselves as being a strong cluster, then we'll continue to look at opportunities to recycle the capital, divest those assets and make better returns on that same capital. Hope that helps.
Thanks. I think my second question is on dividends. Just a bit of follow-up from Rachel's question earlier. I noted that you have actually increased your dividend payout, you know, to 30%, this year. I guess, you know, as ROE has actually improved, any chance of that, you know, maybe committing to a higher payout in the near future?
Sure. We want to have our shareholders participate in our returns, and as we do better, of course, we will look towards announcing even better dividends. I think that this year is exactly a reflection of that. I think we are a growth company, and you can see with our five growth engines, we continue to have strong growth. We are embarked on a strong strategic acquisition journey as well. At the same time, I think this is a good way, a good signal of sharing our returns with our shareholders.
Yeah. I think you should not expect that we are jumping around now up and down with the dividend payout. I think we've made a step change from 40 to 60 that is a responsible move. We could have gone probably slightly higher, but we felt it's probably prudent during this time to say, "Okay, the shareholders participate, but let's still keep the house in order." Discussion on a revised dividend payout strategy. Look, ultimately, the actual payout counts, right? Not so much what the strategy is. Payout over the last years was very strong at
Yeah, even much higher than 30%, closer to 50% in some years. I think you should look at the actual cash that goes back to shareholders. We've increased that for FY 2016. That's a pretty hefty step up. Look, for all intents and purposes, we're gonna stay on that level or increase it going forward.
Thank you.
Thank you. Next question is on Mandavi from Credit Suisse. Please go ahead.
Hi. Good morning, everyone. Congratulations on the good set of results. My first question is related to Acibadem. If we look at occupancy and EBITDA margins, they were very strong in the fourth quarter, you know, exceeding 80% occupancy and a margin of 28%. Could you help us understand, you know, how sustainable is this going forward? You know, I understand occupancy is about 80% is probably a little too high, but what about margins as well? It'd be great if you could give us some color on that.
Sure. I'll kick off and then, maybe.
Oh, sorry. I forgot I had a second part to Acıbadem. Given the strong depreciation in lira, are there plans maybe to lower debt in Turkey? You know, the company has hedged with cross-currency swaps, but it would still help bottom line if finance costs were lower. Thanks. Sorry about that, though. Go ahead.
I was gonna just kick it off and then ask our colleague, Evren, to give more color. So yes, occupancy is high. We expect to maintain that. In fact, because of that, we see strong opportunity for growth. We want to add more beds, add more hospitals. The EBITDA margins were so relatively high at this point. Now, from time to time there will be a movement, right? For example, because of the inflation situation in Turkey, the costs have gone up substantially as of January. We mitigate some of that through price increases. It's possible that for a certain period or at least transiently, you may see some margin fall off because of this transition.
Overall, that will continue absolute growth in terms of EBITDA growth. We do expect our operations to be continued to deliver on. Evren?
Thanks, Kelvin, and good morning. Maybe just to respond to the question on the occupancy. If you look at the fourth quarter, yes, 81 is somewhat inflated. That is also driven by the fact that we still take care of a portion of COVID patients. Typically, last quarter of the year is somewhat busier as people try to come in, they complete their annual checkups. There's additional volume that comes from that. Medical tourism was also quite strong in the fourth quarter. I think that's something that we need to highlight. If you look at the trends in 2021, last quarter, 23% of our revenues were coming from medical travelers, and those are mostly inpatients. That's also another driver that boosted the volume. That's that.
Regarding the margin sustainable, I think just to complement what Calvin said, of course, there's going to be an inflationary effect. Some of our fixed costs are increasing more than the inflation. To give you an example, energy costs. I mean, it's a global trend. It's not only specific to Turkey. So that's something that will impact. We are able to reflect the inflationary effects to our patients through price adjustment. When I say this price adjustment, it's actually threefold. There is a price adjustment that we do to our private insurance patients, price adjustment that is done to patients coming through the public insurance scheme, and then the price adjustment to foreign patients. All those layers has seen a substantial increase.
When you look at how this is gonna correspond to the volume, because our demand is inelastic, we don't see any decline in the number of patients coming to our facilities. Lastly, like I said, we are really focused on medical tourism. Our European revenues try to diversify. Our revenue base is also on our target. You know, our European operations are constantly ramping up our operations in Western Europe as well as Eastern Europe. We see substantial increase. That's also another item that we are monitoring through 2022. Lastly, on the deleveraging, that's a very good point. We continue to delever our position.
In fact, we will be repaying about EUR 50 million this year, scheduled payments. That will also have a significant impact on our leverage position. Thank you.
Thank you. Can I just clarify, did you mention that fourth quarter, 23% of revenue came from medical travelers?
Yes. Turkish revenues. If you look at medical travelers, that is mostly coming through our Turkish hospitals.
Okay.
If you look at the last quarter, substantially, yes.
That's an uptick, right? Because I believe prior to that it was more closer to 18%.
If you look at the trends in 2021, in the first quarter, it started with 16%. Obviously, COVID was quite heavy in the first half of 2021 in Turkey, but then gradually increased. Especially third quarter is a critical quarter for medical travelers. They tend to travel as much, you know, with the summer season, with the easing of restrictions and all that in their home countries. Then in the fourth quarter, it skyrocketed. You see that it's a gradual increase starting from 16% in the first quarter, reaching up to 23% by fourth quarter, which we are expecting and hoping that this trend will continue throughout 2022. We are very focused. We have a lot of strategic initiatives to ensure that we keep these levels going forward.
I think maybe I add to that. Besides the strong foreign patient revenue in Turkey, we also of course look at the FX business that we have in the mainland Europe, in the Netherlands, in Eastern Europe. We are at, I think, already above 40% in total FX contribution to our Acibadem business. The clear objective here is to get to a 50-50 or beyond level. With that there is then of course a very natural hedge in place. The strong operations is then really standing on two legs, not only in Turkish lira business but at least half or more on foreign currency business.
Thanks, Jeorg. That's helpful. My second question will be on capital expenditure. You know, given that IHH will be embarking on the growth journey once more, and there are some plans, ongoing projects such as the medical center for The Woodleigh Mall and the new hospital in Acibadem this year, what's the projected capital expenditure that we should be expecting for this year, and how does it compare with previous years?
I think I said before, I think we've been pretty prudent in the last 2 years. I think I'm not saying there's been a backlog. I don't think we've held anything back that was necessary. I think there is a desire to resolve some of the things you've mentioned in Singapore. We have clearly a need to invest in some of our flagship locations. We have Ataşehir coming online. I think there is capital expenditure happening. I think if you look at this year, there will be an increase in annual CapEx spending. I guess would it be 2.5? Is it 2.2? I don't know. But it's gonna be clearly above where we are now.
Right. Is there maybe a range of number that you can kind of give us the increase in CapEx spending at least?
I think you will see at least a 20% increase in CapEx.
Okay. That's helpful. All right. That's all for me.
Maybe I'll just add to that as well. I talked about 2021 as a springboard year in the sense that we see ourselves positioned for that strong sustainable growth over the mid and long term. The headwinds that we talked about Q1, Q2 is really a short-term effect of COVID fallout that has not changed the long-term growth trajectory of the business. That's why those investments are prudent in adding to some capacity where we need to, for example, Ataşehir in Istanbul, and also some other areas building our ambulatory centers. Also, we will invest strongly in our digital transformation journey, and we see ourselves setting aside about $100 million over the next three years in our IT infrastructure and driving digital transformation.
Thank you, Dr. Loh. That's helpful. That's all for me. I'll jump back to the queue. Thank you.
Thank you. Next question is, Divya, from Morgan Stanley. Please go ahead.
Thank you very much. My first question is on the Singapore business. I'm trying to quantify, you know, the direction that you are guiding of the COVID tapering of revenue. If you could just help me understand where are we in terms of foreign medical patient contributions to Singapore, as of, you know, the latest numbers that you have, given that the VTLs have started. Just wondering if, you know, where we were probably pre-COVID was close to $85 million-$90 million a quarter. You know, where are we currently in terms of contribution from that? And hence, you know, how we expect the COVID-related revenues to be offset.
A little bit more near-term dated question, but I think it would help us manage expectations for the Singapore revenue better, which seems to be, you know, something of a concern right now. Also, given the fact that, you know, the PCR tests on arrival have been withdrawn, I guess you would have a good sense, you know, as we speak now in February, on how much of that, COVID-related revenue would have already been, you know, dissipated because of this. That's my first question, just getting a little bit more color on the Singapore revenue from the foreign patient contribution and from COVID tapering off.
Thanks so much. First, with regards the tapering off, yes, we do expect to see it quite quickly fall off in Q1. You already alluded to PCR on arrival testing being stopped in Singapore. I imagine also that overall, because of the easing, the move towards less testing or antigen testing than the requirements, not just at the airport, but overall, requirements for PCR testing will drop. I also see the Omicron wave as we are experiencing now to pass, not long, like maybe another two weeks to a month, in which case the COVID-19 admissions to Singapore will also drop off. Now, with regards foreign patients, how are we doing now?
For the year, we probably have something like 5%, 6% contribution of revenues from foreign patients in Singapore. In the pre-COVID times, that's about 25%, so there's long way to go. Will this come back? My resounding answer is yes, it will. It will come back with big force and more as travel starts to reopen, as we hear announcements for vaccine travel lanes being announced. For example, a vaccine travel lane was just announced from India, from Indonesia into Singapore starting tomorrow, actually. We are already seeing that bookings start to come. So my answer is that will come back, we are sure, come back with big force. The point, though, is that how long does that inflection take vis-a-vis the COVID-19 melt off?
My suspicion is that Q1 will still be a time where it is possible, maybe even likely, that the COVID-19 melt off for Singapore is gonna be bigger than the rest of that return, but that's likely to be transient.
Got it. Can I just clarify, out of the 29% contribution from COVID in Singapore, roughly half of it testing, PCR testing related, or more?
You can say it's roughly half.
It's roughly half. Okay. That's helpful. Thank you. My second question is just on the margin outlook for this year. You know, you have pointed out that, you know, you're happy with the 25% EBITDA margin, and you have, you know, time and again mentioned on inflationary pressures. We're also cognizant of the fact that, you know, Fortis continues to see margin improvement, Gleneagles Hong Kong is ramping up. You will have the return of international patients as well. Just trying to, you know, put these two together and see that, do you actually think that margins can improve further despite, you know, your cautioning on the, inflationary cost pressures because of all the other drivers that you have?
The answer is yes. I do expect it to improve over time. Firstly, there will certainly be absolute growth. Will margins come back and return over the long run because of all the factors that you have said, startup locations starting to fill up, such as Hong Kong? I think yes. Now, the guidance and what you call caution was with regards the shorter term over the next one, two quarters. I guess that's where that situation or that compression comes from. I think we have to acknowledge that it comes off the back of some of our geographies are seeing very strong margins in the last quarter for some reasons, right?
Evren mentioned the specific reasons in Turkey. In Singapore, we mentioned the strong COVID-19 contribution. I think some of that which is transiently pushed up because of these factors, I guess you expect some normalization. Of course, our long-term journey, as you called it, will re-impact after this inflection part of the journey.
Got it. Just to confirm, I mean, you do expect absolute growth in 2022 both at the top line and profit level despite these near-term headwinds?
We always hope for growth. I think it's a matter of how what's the degree of that, how the inflection plays out. We could be far wrong too. In an absolute worst case, a new mutant comes out, and then we are back to where things were for the last one year.
I'd like to imagine that happens.
I think as a guidance, we're happy with 25%. 24%-25% we're really happy with. I think we have to be mindful in the near term, there are inflationary effects. There is cost increase. COVID is melting off. I think in the short term, for the next 12 months, I think we do see 2022 as a platform year to then grow from there. Whether you see a substantial margin growth in 2022 itself, I think I would be a bit careful. 24%-25% range I think is super good. I think we should be comfortable if we get there and achieve that, at least from our side, we feel it's doable.
I think just as a short-term guidance, I think that's a perfect range to consider.
Got it. Thank you very much.
Thanks, Divya. I think we have some questions from the webcast, and so we'll take it from the people who have put it up. If I can start off with the first one, it's from Huan Wen. Occupancy rate in India and Turkey have already recovered to pre-pandemic levels, but revenue intensity is still significantly higher than pre-pandemic. Is this sustainable? What were the government grants in 4Q 2021? How much government grants there was in 2021, and is this expected to continue COVID-19 revenues? Any visibility with this? With Omicron surging in Malaysia and Singapore, will COVID-19 revenues be strong in 1Q 2022?
A couple of questions. The revenue intensity, government grants and Omicron effect. With regards to this revenue intensity, the effect that you see, I mentioned earlier that, yes, during COVID-19 times, there is potentially a higher revenue intensity because some patients get deferred out and those are the softer electives, and therefore the sicker patients come, and therefore it creates a higher visually, optically higher revenue intensity. As time passes, the normal cases start to come back or even the softer electives start to come back and therefore you start to see some normalization. Now, you alluded to that in some cases, it appears to have that doesn't seem to have gone back down to pre-pandemic times.
That's exactly, part of that is due to the reason I had mentioned, right? There is increase in revenue intensity in any case as a tidal effect, COVID or otherwise. Year after year, we as a medical provider will deepen our clinical capabilities. We do more complex treatments. We do things which we save lives in ways that could not have been saved before. Therefore, all that contributes to a rising revenue intensity. Some of that will actually stick. Not all of that increased revenue intensity that you see during COVID-19 times is due to simply the effect of the pandemic. Some of it will stick, and I think you are alluding to you're starting to see some of the effect.
My colleague, Evren, gave some specific reasons around that case for Turkey in Q4. Again, as time passes, for all the reasons that have been mentioned, us doing more complex things, aging population, and yes, from time to time some inflationary pricing adjustments, I think we do expect that revenue intensity does have a progressive path of increase by itself. On the Omicron situation, will we expect to see a lot more admissions? My personal view of it is unlikely. The Omicron wave in countries that have experienced it appear to be short-lived, in most cases, lasting about two months. That was true in South Africa. That was true in India.
In India, while Omicron caused admissions to spike up in January, I think that wave is really passing off. My answer is I don't think so, we'll see that much more Omicron, hopefully. Oh, and on government grants, that's basically there was hardly any government grants in 2021, actually. Not materially, anyway.
Sure. Thank you, Dr. Loh. We have also several questions coming from Paul Chu. In Singapore, what types of COVID-19 related revenue can we expect in full year 2022? I think you somewhat addressed it earlier, right? Maybe we move on to the second one. What is COVID-19 related revenue in Singapore as a percentage of full year 2021 total sales?
For the whole year was 24%. Singapore.
That's pertaining to Singapore specifically, the 24% of Singapore's revenue.
Yeah.
Yeah. Any opportunity to adjust prices in other countries apart from Turkey?
The answer is yes. We'll do so in well-considered manner. I've made a very strong commitment that we will deliver care that's patients first, that's value driven. As we deliver better, improve our service, deepen our clinical capabilities, while there's some inflationary pressures, I think we will make appropriate adjustments. Again, keeping to that same commitment to build trust and deliver value.
Sure. Thank you. For Parkway Shanghai, what will be the initial or leading challenges to attract patients?
Parkway Shanghai, we expect to open by Q3. It'll be a soft opening. The China regulatory environment is that you do get licenses in a very progressive fashion, so you cannot actually open the entire hospital and all its services all in one go. We'll do a soft opening progressively. We'll get doctors in, good doctors who can bring in patients. We'll partner with, insurers, payers, to bring the patient in. What we'll do all that is necessary, and the costs, we'll manage those costs as we progressively ramp up the hospital.
The next question comes from Azman Mokhtar. Congrats on the strong results. He has a question on IHH plans for strategic acquisition. Is IHH trying to gain more market share in its existing geographies such as Malaysia, Singapore, India, Turkey and China, and businesses such as hospital labs via acquisitions or making acquisitions to go into new geographies and business areas in the healthcare sector?
The answer overall is yes. Thanks, Raman, to all those questions. Almost in order of that priority, we regard our local markets first, strategic bolt-ons to strong clusters. Labs, we are very interested. Yes, new geographies, potential, everything we can do well, but roughly almost in that priority that you listed.
Thanks, Dr. Loh. Next question from Gerald. Hi, Dr. Loh. Post the 33% price hike in Turkey, do you see local inpatient volumes sustaining currently? And what about the foreign patient, foreign inpatient volume trends post price hike?
Thanks, Gerald. The answer is yes. We do see inpatient volumes sustaining. In fact, we see potential for stronger growth, and foreign patient volumes certainly not affected. We actually continue to expect growth as well.
Okay. The next question from Kamei. Hi. Thank you so much for the call. Singapore is the only market which saw stable COVID-19 revenue contribution. Would you be able to point us to what kind of services that were driving the COVID-19 revenue in 4Q versus 3Q? Was there large change in mix of services Q on Q and year on year?
I think by and large, it's really laboratory testing and then some admissions. The admissions may go up and down with time. In Singapore, you can say that in Q4 there was a larger contribution from admissions than in Q3. I think the main point to think about, and I think it is something that's good, is that really as we go forward, we expect both to start to taper.
Sure. I think that's all the questions we have from the webcast. Operator, I hand it back to you to see if there's any other questions from the participants on the call.
Uh, right now we don't have any further questions. Uh, if you would like to ask a question, please press zero one on the telephone keypad now.
Operator, if there are no further questions, I think we are ready to also conclude the call. All right. If there are no further questions now, we will conclude the IHH Healthcare fourth quarter and full year 2021 financial results briefing. Thank you for joining us this morning, and if you have any questions, please do contact us at ir