MD MEDICAL GROUP ANNOUNCES OPERATING RESULTS FOR Q1 2023

28 April 2023 MD Medical Group Investments Plc (MD Medical Group, MDMG, Group or the Company; LSE and MOEX: MDMG), a leading Russian private healthcare provider, today announces its operating and unaudited financial results for the first quarter of 2023.

Key financial highlights for Q1 2023:

• Total revenue remained flat year-on-year (y-o-y) at RUB 6,221 million.
• Revenue of the Groups regional hospitals grew by 14.4% y-o-y to RUB 1,669 million thanks to the strong operational performance of the medical cluster in Tyumen, the target utilisation rate achieved at IDK hospital in Samara, as well as the solid results of MD Group Lakhta hospital in St Petersburg.
• Revenue from out-patient clinics in other regions rose by 23.0% y-o-y to RUB 823 million as elective care and IVF recovered following the pandemic.
• Revenue of the Groups hospitals in Moscow decreased by 11.0% y-o-y to RUB 3,084 million due to the strong base effect in Q1 2022 associated with a high utilisation rate at the Lapino-4 COVID treatment facility amid the pandemic.
• Revenue from out-patient clinics in Moscow and the Moscow Region rose by 5.1% y-o-y to RUB 641 million on the back of stronger demand for IVF following the pandemic.

Key operational highlights for Q1 2023:

• Total out-patient treatments increased by 7.8% y-o-y to 485,959, with the average ticket up 4.4% to RUB 5.4 thousand in Moscow and down 0.2% y-o-y to RUB 2.1 thousand in other regions.
• Total in-patient treatments went up by 1.6% y-o-y to 35,395, with the average ticket down 11.1% to RUB 90.3 thousand in Moscow and up 0.2% y-o-y to RUB 36.4 thousand in other regions.
• Total IVF cycles increased by 14.9% y-o-y to 4,140, with the average ticket increasing by 9.7% to RUB 287.1 thousand in Moscow and by 14.0% y-o-y to RUB 266.1 thousand in other regions.
• Total deliveries increased by 9.9% y-o-y to 2,207, with the average ticket decreasing by 6.6%   y-o-y to RUB 456.2 thousand in Moscow and rising by 12.1% y-o-y to RUB 192.4 thousand in other regions.

Key events during Q1 2023 and after the reporting period:

• Medical centre opened in the Moscow Region. On 13 January 2023, MD Medical Group opened a new out-patient medical centre, Mother & Child Mytishchi, with a capacity of up to 24,000 appointments per year. Total investments in the project stood at around RUB 23 million.
• Launching the procedure for changing the GDR programme depositary. On 10 April 2023, MD Medical Group launched the procedure for changing the depositary bank that administers the Companys Global Depositary Receipts (GDR) programme. RCS Issuer Services S.A.R.L. was appointed as the new depositary bank. This process will take about 120 days[1].

Mark Kurtser, CEO at MDMG, said:

We made a head start in 2023, demonstrating the Companys ability to adjust to the changing market environment and delivering strong operating performance.

In Q1 2023, we continued building up capabilities in our traditional areas. In particular, we ran 15% more IVF cycles y-o-y, with revenue growing by 29%.

Despite a certain demographic decline nationwide, our growth in deliveries amounted to 10% in the first quarter, mainly driven by regional hospitals. As an example, MD Group Lakhta hospital in St Petersburg has already achieved a 30% utilisation rate in the first year of its core operations and is up for further growth. In Q1 2023, the regional growth of revenue in deliveries was 41%.

It is also worthy of note that childrens healthcare keeps growing, with its revenue for the period up by 15%.

Despite the expected decrease in COVID-19 diagnostic and treatment services, we see stable demand in non-core multidisciplinary segments, such as oncology, trauma care, and therapy. In Q1 2023, the Groups Revenue growth, excluding the impact of COVID-19, was 11%.

We keep developing our business and solidifying our positions in the existing markets. We have already started the construction of a nuclear medical centre at the Lapino medical cluster and a clinical hospital in Domodedovo, as well as multidisciplinary clinic in Moscow.

Capitalising on the solid results of the reporting period, we continue increasing the utilisation rate at our existing hospitals and building new assets to support sustainable growth going forward.

Key Highlights for Q1 2023

LFL performance for Q1 2023, % y-o-y

Hospitals in Moscow

In Q1 2023, revenue, including other revenue[3], from Moscow hospitals declined by 11.0% y-o-y to RUB 3,084 million, mainly driven by a decrease in COVID-19 diagnostic and treatment services amid the pandemic slowdown, with a y-o-y drop in the number of in-patient days and out-patient visits by 4.9% and 1.5%, respectively. In addition, revenue was negatively affected by fewer deliveries in Moscow (down 4.4% y-o-y) due to the overall downward trend in Russias birth rate.

A decrease in revenue from COVID-19 diagnostic and treatment services and revenue from delivery services was partly offset by a 36.4% y-o-y spike in revenue from IVF thanks to the post-pandemic demand recovery (+14.7% IVF cycles y-o-y), as well as stronger demand for treatment unrelated to womens and childrens healthcare (the number of in-patient days in traumatology, oncology, and therapy was up +64.1%, +18.7% and +22.1% y-o-y, respectively).

Significant growth of the average IVF ticket by 18.9% y-o-y came from an increase in the number of IVF services provided using new treatment standards (EmbryoScope), as well as higher reliance on donor materials.

The average ticket for in-patient treatments fell by 11.1% y-o-y, mainly driven by a drop in the number of COVID-19 intensive care beds amid the pandemic slowdown. 

Hospitals in regions

In Q1 2023, regional hospitals revenue grew by 14.4% y-o-y to RUB 1,669 million, driven mainly by a 26.1% y-o-y surge in deliveries, with revenue from this business line up 41.4% y-o-y.

A considerable increase in the number of deliveries came on the back of Tyumen-1 and Samara-based IDK hospital gradually progressing towards design capacity (with utilisation rates going up 2.4 p.p. y-o-y to 28.0% and 2.9 p.p. y-o-y to 45.0%, respectively), as well as strong results of the new MD Group Lakhta hospital in St Petersburg, which achieved a 30.5% utilisation rate in the reporting period.

The 12.1% y-o-y increase in the average ticket for deliveries in regional hospitals was mainly driven by indexed prices.

Revenue growth was also significantly fuelled by an increase in the number of IVF cycles (up 9.8% y-o-y) amid the post-pandemic demand recovery, with revenue rising by 27.9% y-o-y in this segment. The growth of the average IVF ticket by 16.4% was supported by an increase in the number of IVF services provided using new treatment standards (EmbryoScope).

Out-patient clinics in Moscow and Moscow Region

In Q1 2023, revenue from clinics in Moscow and the Moscow Region rose by 5.1% y-o-y to RUB 641 million. Revenue growth in the reporting period was mainly attributable to a 7.7% y-o-y increase in the number of IVF cycles amid the post-pandemic demand recovery.

Out-patient clinics in regions

In Q1 2023, revenue from regional out-patient clinics rose by 23.0% y-o-y to RUB 823 million. Revenue growth was attributable to the recovering demand, with IVF cycles up 21.0% y-o-y. On a positive note, we opened the Novosibirsk Centre for Reproductive Medicine renovated in 1H 2022 in addition to strong results of the clinic with a focus on IVF launched in Yekaterinburg in November 2022.

The growth of the average IVF ticket by 13.4% y-o-y was supported by an increase in the number of IVF services provided using new treatment standards (EmbryoScope).

The reporting period saw a spike in attendance (up 16.9% y-o-y) along with a 5.4% drop in the average ticket on the back of the growing share of telemedicine in total visits.

Net cash position

As at 31 March 2023, the Groups debt represented entirely by lease liabilities declined from the 31 December 2022 level by RUB 27 million to RUB 623 million. As a result, as at 31 March 2023, the Companys net cash position amounted to RUB 5,539 million.

Capex

Total Capex declined by 72.9% y-o-y to RUB 149 million in Q1 2023. The hospital segment accounts for the bulk of Capex (69.8%), while the construction of new clinics and ongoing maintenance make up 30.2% of total Capex.

In the reporting period, the Group opened the Mother & Child Mytishchi medical centre with a focus on antenatal care.

The Lapino-3 nuclear medical centre (part of the Lapino medical cluster) and the Domodedovo multi-functional hospital are in their designing cycle, both expected to be launched in 2025. Their estimated Capex amounts to approximately RUB 8.5 billion.

In Q4 2023, multidisciplinary clinic is expected to be launched in ZILART residential complex in Moscow. Its estimated Capex amounts to approximately RUB 78 million. 

Notes:

1. Data is based on management accounts
2. Minor variations in calculation of totals, subtotals and/or percentage change are due to rounding of decimals

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For further information please contact:

Investors

Battalova Renata

Investor Relations Director

Tel.: +7 917 294 28 82

r.battalova@mcclinics.ru

About MD Medical Group

MD Medical Group is a leading provider in the highly attractive Russian private healthcare service market. Today, the Company manages 53 state-of-the-art healthcare facilities, including 10 multidisciplinary hospitals and 43 out-patient clinics in 26 regions of the Russian Federation. In 2022, MD Medical Groups revenue amounted to RUB 25.2 bln. The Companys global depositary receipts are traded on the London Stock Exchange (LSE: MDMG) and Moscow Exchange (MOEX: MDMG).

Forward-Looking Statements

This press release contains forward-looking statements, which are based on the Companys current expectations and assumptions and may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The forward-looking statements contained in this press release are based on past trends or activities and should not be taken that such trends or activities will continue in the future. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of variables which could cause actual results or trends to differ materially, including, but not limited to: conditions in the market, market position of the Company, earnings, financial position, cash flows, return on capital and operating margins, anticipated investments and economic conditions; the Companys ability to obtain capital/additional finance; a reduction in demand by customers; an increase in competition; an unexpected decline in revenue or profitability; legislative, fiscal and regulatory developments, including, but   not limited to, changes in environmental and health and safety regulations; exchange rate fluctuations; retention of senior management; the maintenance of labour relations; fluctuations in the cost of input costs; and operating and financial restrictions as a result of financing arrangements. No statement in this press release is intended to constitute a profit forecast, nor should any statements be interpreted to mean that earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding   financial periods for the Company. Each forward-looking statement relates only as of the date of the particular statement.

[1] As of the date of the press release published on 10 April 2023

[2] Adjustments in 2022 are associated with a change in the accounting methodology in 2023 of the Group's operating indicators

[3] Other revenue includes other medical revenue (incl. laboratory tests) and other non-medical revenue