IHH Healthcare Navigates Dynamic Landscape: Q1 2025 Performance Review
As a senior blogger focusing on the Malaysian market, I’m always keen to dive into the latest corporate earnings reports, especially from bellwethers like IHH Healthcare Berhad. Their First Quarter 2025 interim financial report, covering the period ended March 31, 2025, offers a compelling look at the company’s operational strength amidst a complex global economic backdrop.
While the headline profit figures might initially seem to present a challenge, a deeper dive reveals a story of sustained operational growth, strategic expansion, and proactive management of industry headwinds. Notably, the report highlights a 6% increase in revenue and a final single-tier cash dividend of 5.50 sen per ordinary share for the financial year ended 31 December 2024, paid on April 28, 2025. This payout underscores IHH’s commitment to shareholder returns.
Let’s break down the key takeaways from this quarter’s performance.
Core Financial Highlights: A Tale of Two Profits
At first glance, the reported profit for the period shows a significant decrease. However, it’s crucial to understand the impact of accounting standards, particularly MFRS 129 (Financial Reporting in Hyperinflationary Economies) applied to IHH’s Turkish operations, and exceptional items from the previous year. When we strip out these non-operational factors, a clearer picture of IHH’s underlying performance emerges.
Q1 2025 (RM’mil)
Revenue: 6,294
Profit before tax: 762
Profit for the period: 625
Profit attributable to owners of the Company (Excl. EI): 425
Basic Earnings per share (sen): 5.83
Basic Earnings per share (Excl. EI) (sen): 4.82
Q1 2024 (RM’mil)
Revenue: 5,955
Profit before tax: 931
Profit for the period: 925
Profit attributable to owners of the Company (Excl. EI): 403
Basic Earnings per share (sen): 8.72
Basic Earnings per share (Excl. EI) (sen): 4.57
As you can see, IHH’s reported revenue grew by 6% from RM5,955 million in Q1 2024 to RM6,294 million in Q1 2025. This growth was driven by sustained demand for quality healthcare services, a case-mix of more acute patients, and necessary price adjustments to counter inflation. The consolidation of Island Hospital, acquired in November 2024, also played a role.
However, the reported Profit for the period decreased by 32%. This significant variance is largely due to the application of MFRS 129 to IHH’s Turkish entities, which impacted various line items. More importantly, in Q1 2024, Acibadem Holdings recognized a substantial RM293.4 million deferred tax credit, which was an exceptional item not recurring in Q1 2025. This one-off credit in the prior year heavily influenced the reported profit comparison.
A more representative measure of operational performance is the Profit Attributable to Owners of the Company, excluding Exceptional Items (PATMI Excl. EI). This figure actually saw a healthy 5% increase, rising from RM403 million in Q1 2024 to RM425 million in Q1 2025. This demonstrates the underlying strength of IHH’s core healthcare operations.
Similarly, Basic Earnings per Share (Excl. EI) also increased by 5%, from 4.57 sen to 4.82 sen, reflecting this positive operational trend.
Segmental Performance: Growth Across Borders
IHH’s diverse geographical footprint continues to be a key strength. Here’s a look at how each segment performed:
-
Hospital and Healthcare (Overall): This segment’s revenue increased by 7% to RM6,048 million. EBITDA remained flat at RM1,098 million, primarily due to higher staff costs, other operating expenses (like utilities), and start-up costs for the new Acibadem Kartal Hospital.
- Singapore: While inpatient admissions decreased by 6%, revenue per inpatient admission rose by 10% to RM67,294, indicating a higher case mix.
- Malaysia: A strong performer with inpatient admissions up 6% and revenue per inpatient admission up 6% to RM11,334. The acquisition of Island Hospital significantly contributed here.
- India: Inpatient admissions increased by 7%, and revenue per inpatient admission grew by 4% to RM10,152.
- Greater China: This region saw robust growth, with revenue increasing by 12% and EBITDA soaring by 80%.
- Turkiye and Europe: Revenue increased by 12%, with revenue per inpatient admission rising by 16% to RM13,522, largely due to price adjustments to counter hyperinflation.
- Labs: Total revenue for Labs decreased by 3% to RM434 million, and EBITDA fell by 12% to RM85 million, despite a 5% increase in total test volumes to 26 million.
- PLife REIT: This segment showed excellent growth, with external revenue up 15% to RM45 million and EBITDA up 4% to RM86 million, benefiting from the acquisition of 11 nursing homes in France in December 2024.
Financial Health and Strategic Investments
IHH’s balance sheet remains robust, with total assets increasing to RM57,192 million as at March 31, 2025, from RM56,759 million at December 31, 2024. This increase is largely attributed to investments in expansion projects and new medical equipment, alongside the effects of MFRS 129. Property, plant and equipment, for instance, increased to RM16,597 million from RM16,229 million.
The Group’s net assets per share attributable to owners of the Company also slightly increased to RM3.43 from RM3.42. Loans and borrowings increased to RM13,747 million, primarily to fund capital expenditure and strategic acquisitions, showcasing the company’s commitment to growth.
Risks and Future Prospects: Navigating Headwinds with Strategic Focus
IHH Healthcare is not resting on its laurels. The Group is actively pursuing its expansion and growth strategies to meet the rising demand for quality healthcare. Key initiatives include:
- Opening of the 127-bed Acibadem Kartal Hospital in Turkey in Q1 2025.
- Expected completion of the acquisition of the 228-bedded Shrimann Superspeciality Hospital in India during the year.
- Progressive reopening of beds at Mount Elizabeth Orchard Hospital in Singapore, with its 3-year upgrading project set for completion in 2025.
However, the company acknowledges significant industry-wide challenges, including rising cost pressures (staff, energy) and ongoing payor pressures from insurers. To address these, IHH has launched a multi-year transformation initiative focusing on seven key areas, from clinical excellence to technology advancement.
One notable ongoing development is the complex litigation surrounding the Fortis and Malar Open Offers in India. While IHH’s indirect subsidiary, Northern TK Venture Pte Ltd (NTK), is seeking to proceed with these offers, the process has been entangled in legal proceedings, particularly with the Supreme Court of India’s “status quo” order and subsequent developments. Furthermore, NTK has filed a claim against Daiichi in the Tokyo District Court, seeking damages for alleged interference with the open offers. These legal matters represent a contingent liability and an ongoing strategic challenge.
Summary and
IHH Healthcare’s Q1 2025 report reveals a company that is operationally robust and strategically expanding. While reported profits were impacted by non-cash accounting adjustments and the absence of prior-year exceptional tax credits, the underlying operational performance, as reflected by PATMI (Excl. EI), shows healthy growth. The company’s diversified portfolio across key markets continues to perform well, and its proactive approach to managing rising costs and market dynamics through strategic transformation initiatives is commendable.
However, potential investors should be mindful of the following key points:
- Impact of MFRS 129 and Exceptional Items: Understand the distinction between reported profit and profit excluding exceptional items, as the latter provides a clearer view of operational performance.
- Rising Cost Pressures: The healthcare sector faces increasing staff and energy costs, which IHH is actively managing through efficiency drives and price adjustments.
- Regulatory and Litigation Risks: The ongoing legal complexities surrounding the Fortis and Malar Open Offers, along with the lawsuit against Daiichi, introduce uncertainties that warrant close monitoring.
- Currency Fluctuations: As a global operator, IHH’s results are sensitive to movements in foreign exchange rates, especially against the Turkish Lira and Singapore Dollar.
From a professional perspective, IHH Healthcare appears to be well-positioned to navigate the current economic climate, leveraging its strong fundamentals and strategic growth initiatives. The continuous investment in capacity expansion and technology, coupled with a focus on operational excellence, bodes well for its long-term trajectory in the growing healthcare sector.
What are your thoughts on IHH Healthcare’s Q1 2025 performance? Do you think the company can maintain this growth momentum and effectively manage the challenges ahead? Share your views in the comments section below!
