Wednesday, 28 August 2013

IHH: profit up 60% or profit down 60%?

From The Star website:

"IHH Healthcare net profit up 60% to RM188.7m in Q2"

IHH Healthcare Bhd's net profit rose 60% to RM188.70mil in the second quarter ended June 30, 2013, excluding exceptional items and recognition of the sale of medical suites.

The company said on Tuesday the higher profit was due to the rise in earnings before interest, tax, depreciation and amortisation (EBITDA), savings in finance costs from repayment of short-term loans, and a one-off RM22.0mil tax credit this quarter relating to tax from a previous year.

IHH's revenue, excluding recognition of the sale of medical suites, grew by 14% on-year to RM1.68bil from RM1.48bil.  Earnings before interest, taxes, depreciation, amortisation, exchange differences & other non-operational items rose 20% on-year to RM419.6mil from RM349.2mil.

"The group's robust earnings were buoyed by the ramp up of new hospitals this quarter. Its newest facility in Singapore, Mount Elizabeth Novena Hospital, turned EBITDA positive for this quarter," it pointed out.

IHH Healthcare said Acibadem recorded healthy earnings and improved EBITDA from its two new hospitals - Acibadem Ankara and Acibadem Bodrum - despite a seasonal dip in inpatient admissions volumes this quarter compared to a year ago.

As for Acibadem Ankara, which opened in November 2012, turned EBITDA positive for this quarter while Acibadem Bodrum continued reducing its EBITDA losses.

The hospital group said in the six months ended June 30, 2013, excluding the recognition of the sale of medical suites, the group achieved 21% increase for both revenue and EBITDA from a year ago.

The strong performance was driven by organic growth of existing operations, ramping up of new hospitals as well as the full six months consolidation of Acibadem Holding's performance in H1, 2013 as compared to only five months consolidation in H1 2012 when the Group acquired Acibadem Holding on 24 January 2012.

The group's year-to-date 2013 PATMI excluding exceptional items and the recognition of sale of medical suites increased 39% to RM322.1mil, compared to the same period a year ago.

Shareholders of IHH who read the above surely must be very happy with their investment.

But when we look at the official announcement at the Bursa Malaysia website, we see something very different:

Earnings are hugely down, by about 60% compared to the same quarter a year ago!

Where does the difference come from? The official announcement uses the correct PBT and PAT based on time tested accounting principles, while the company's press release uses EBITDA (corrected for certain one-off items), which are simply nothing else then "Bull Shit Earnings" according to Charlie Munger.

The press release of IHH (to be found at the Bursa Malaysia website) is really disturbing in the sense that it does not mention at all the real profit numbers (PBT and PAT) in the main text (they can only be found in appendix 1 at page 4, where also EBITDA is mentioned in the same table) . 

I have no problem that the company tries to give a positive spin to the story (that is quite normal), but the correct basic numbers should be presented in a clear and transparent way, even if they look bad.

And for The Star, they should analyse press releases before they publish them, and put critical remarks alongside them. Nobody is helped by this kind of non-information, which I think is borderline misleading. Even the title is plain wrong, net profit is PAT, there is no way around it.

A much better article can be found on the website of The Sun:

"IHH Healthcare Bhd, the second largest healthcare group in the world in terms of market value, reported a net profit of RM156.76 million, or 1.93 sen a share in the second quarter ended June 30, 2013 (Q2).

The net profit was much lower compared with RM398.9 million made a year earlier".

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