Fortis Healthcare back in black, reports Rs 135-crore profit in Q4

Fortis has said it is working on balance sheet strengthening through portfolio optimisation and non-core asset monetisation

IHH Healthcare makes open offer for Fortis Malar at Rs 60 per share

Fortis Healthcare showed signs of revival in the fourth quarter of FY19, with improved earnings before interest, tax, depreciation and amortisation (Ebitda). 

The Gurugram-headquartered health care major reported net profit (profit after tax and minority interests) of Rs 135.6 crore after accounting for exceptional items for the fourth quarter of the FY19. This was against a loss of Rs 932 crore in the same period last year. 

Exceptional items for the quarter primarily include allowance for doubtful advance and security deposit given to corporate entities, along with impairments taken in capital work in progress (Rs 47.4 crore), impairment of investment and allowance for doubtful loans to subsidiary company (Rs 55 lakh) and impairments of goodwill of Shalimar Bagh property, among others.

The exceptional items for the quarter stood at Rs 66.31 crore while for the full year it was Rs 67.95 crore. The full year saw additional expenses on composite scheme of arrangement and amalgamation.

This was pertaining to an earlier board decision (around August 2016) to demerge the diagnostics business SRL into another majority-owned subsidiary of Fortis Malar Hospitals. In June 2018, Fortis Malar, and SRL decided to withdraw from the scheme. 

Consolidated revenues for the fourth quarter grew 9 per cent to Rs 1,184 crore. Consolidated operating Ebitda grew by 123 per cent to Rs 167 crore in the quarter. The company said in a statement that adjusted for the one-time off Ebitda from RHT Trust Manager, the consolidated operating Ebitda growth was at 88 per cent. 

RHT Trust Manager (RHTTM) is the trustee manager of the RHT Health Trust and is 100 per cent owned by one of the step-down subsidiaries of Fortis Healthcare. 

The one-off Ebitda  from RHTTM relates to the one-time payment received by the trustee manager as a result of completion of the RHT transaction in January 2019.

The hospital business’s operating Ebitda grew 120 per cent to Rs 92 crore against Rs 42 crore in Q4FY18. The diagnostics business operating Ebitda grew 48 per cent to Rs 49 crore against Rs 33 crore in the corresponding period of the previous quarter. 

For the full year of 2018-19, Fortis posted a loss of Rs 299 crore (after accounting for exceptional items), which has improved from Rs 1,009 crore (loss) in 2017-18. Income from operations dipped by 2 per cent year-on-year in 2018-19 to Rs 4,469.36 crore. Consolidated operating Ebitda margins were at 7. 3 per cent against 8.5 per cent in FY18.

Commenting on the results, Ashutosh Raghuvanshi, managing director and chief executive officer (MD & CEO), Fortis Healthcare, said, “Our operations are improving steadily, and we are on the path to recovery as the worst is behind us. Our priority this year is to further strengthen our liquidity position that would enable us to invest in future growth to achieve shareholder returns. Despite the challenging last couple of years, we’ve bounced back.”

Fortis noted that it is working on balance sheet strengthening through portfolio optimisation and non-core asset monetisation. Bringing back the RHT (hospital assets) as well IHH’s infusion of Rs 4,000 crore during the year have strengthened the company’s balance sheet. 

The health care major continues to focus on strengthening cash flows and liquidity position through lower cost of borrowings (reducing finance costs by 400-500 bps) and it is working on strengthening working capital management and is focusing on receivables and inventory. Rating agencies like Icra and CARE have raised the company’s credit ratings. 

Ravi Rajagopal, chairman, Fortis Healthcare, said, “IHH’s preferential allotment in Fortis has re-capitalised the company’s balance sheet, allowing us to refocus on business operations and deliver what we do best, that is, patient care. We have successfully stabilised our operations over the last six months and continue to witness an ongoing improvement in both the hospitals and diagnostics business.”