Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Condensed Financial Statement And Dividend Announcement For The Second Quarter Ended 30 June 2021 (“2Q21”)

Balance Sheet

Review of Performance

Statement of Comprehensive Income

Revenue

Revenue contribution from dental and medical clinics increased by 86% from $20.5 million for the three months ended 30 June 2020 (“2Q20”) to $38.1 million for the three months ended 30 June 2021 (“2Q21”). The increase of $17.6 million was mainly due to higher revenue from exiting outlets in Singapore. Revenue in 2Q20 were impacted by the Circuit Breaker (“CB”) from April 2020 to May 2020.

As at 30 June 2021, the Group has 87 dental outlets, 5 medical outlets and 1 dental college in operations, compared to 80 dental outlets, 5 medical outlets and 1 dental college as at 30 June 2020.

As at 30 June 2021, the Group has 37 dental outlets in Malaysia and 1 dental outlet in People’s Republic of China (“PRC”) compared to 33 dental outlets in Malaysia and 1 dental outlet in PRC as at 30 June 2020.

Revenue contribution from medical laboratory and dental equipment & supplies increased by 191% from $4.4 million in 2Q20 to $12.7 million in 2Q21. The increase was mainly due to revenue from Covid-19 testing from the Group’s Covid-19 medical laboratory business. The medical laboratory license was obtained in September 2020.

Total revenue increased by 73% from $54.7 million in 1H20 to $94.6 million in 1H21.

Other Losses – Net

Other losses – net amounted $0.2 million in 2Q21. This loss was mainly due to the allowance for impairment on inventories and plant and equipment written off.

Other losses was $0.1 million in 1H20 as compared to a gain of $4.0 million in 1H21 mainly due to profit on disposal of Aidite in 1Q21.

Other Items of Expense

Consumables and Supplies Used in Dental & Medical Clinics

Consumables and supplies used increased by 118% from $1.6 million in 2Q20 to $3.4 million in 2Q21. The increase of $1.8 million was mainly attributable to increase in revenue and as well as the increased usage of personnel protection equipment (“PPE”) due to the Covid-19 pandemic.

As a percentage of revenue from the dental and medical outlets, consumables and supplies used in the dental and medical outlets in 2Q21 was 8.9% compared to 7.6% in 2Q20. Comparing 1H21 with 1H20, consumables and supplies used in dental and medical clinics increased by 77% or $3.0 million which was due to the increase in revenue as well as increased usage of PPE due to the Covid-19 pandemic.

Cost of Sales from Medical Laboratory and Dental Equipment & Supplies

The cost of sales from medical laboratory and dental equipment & supplies increased by 130% from $1.7 million in 1Q20 to $4.0 million in 2Q21. The increase was mainly due to revenue from the medical laboratory in Singapore in 2Q21. The medical laboratory license was obtained in September 2020.

As a percentage of revenue from medical laboratory, cost of sales used in medical laboratory in 2Q21 was 31.1% compared to 39.4% in 2Q20.

Comparing 1H21 with 1H20, cost of sales from medical laboratory increased by 107% or $3.1 million.

Employee Benefits Expense

Employee benefits expense, which include professional fees paid to dentists, increased by 124% from $10.5 million in 2Q20 to $23.6 million in 2Q21. The increase of $13.1 million was mainly due to increase in revenue from existing and new dental outlets in Singapore in 2Q21, $2.3 million Job Support Scheme in 2Q20 as well as the partial reversal of accrued bonus for staff amounting to $1.3 million in 2Q20 provided in FY2019 for the profit on disposal of Aidite which was not paid due to the economic uncertainty arising from the Covid-19 pandemic.

As a percentage of revenue, employee benefits expense in 2Q21 was 46.4% compared to 42.4% in 2Q20.

Comparing 1H21 with 1H20, employee benefits expense increased by 71% or $20.1 million.

Depreciation and Amortisation Expense

Depreciation and amortisation expense increased by 17% from $0.9 million in 2Q20 to $1.0 million in 2Q21. The increase of $0.1 million was mainly to higher depreciation expense from the medical laboratory in Singapore for 2Q21.

As a percentage of revenue, depreciation and amortisation expense in 2Q21 was 2.0% compared to 3.5% in 2Q20.

Comparing 1H21 with 1H20, depreciation and amortisation expense increased by 13% or $0.2 million.

Depreciation of Right-Of-Use (“ROU”) Assets

Depreciation of ROU assets increased by 218% from $0.7 million in 2Q20 to $2.2 million in 2Q21. The increase of $1.5million was mainly due to the offsetting of $2.2 million rental rebate received in 2Q20. In 2Q21, the Group accrued $0.6 million rental rebate receivable under the Rental Support Scheme for the period from 14 May 2021 to 29 May 2021 to help business through restrictions imposed to curb a surge in Covid-19 cases.

As a percentage of revenue, depreciation of ROU assets in 2Q21 was 4.3% compared to 2.8% in 2Q20.

Comparing 1H21 with 1H20, depreciation of ROU assets increased by 42% or $1.5 million.

Other Expenses

Other expenses increased by 128% from $1.2 million in 2Q20 to $2.8 million in 2Q21. The increase of $1.6 million was mainly due to higher revenue in 2Q21 which resulted in higher incidental expenses like credit card charges, increase in legal and professional fees due to the legal case in PRC, increase in marketing expenses arising from giving masks for patients retention and reinstatement cost from clinics’ relocation.

As a percentage of revenue, other expenses in 2Q21 was 5.6% compared to 5.0% in 2Q20.

Comparing 1H21 with 1H20, other expenses increased by 99% or $2.6 million.

Finance Costs

Finance costs decreased by 30% from $1.1 million in 2Q20 to $0.8 million in 2Q21. The decrease was mainly due to lower interest expense in 2Q21 as a result of lower interest rate.

As a percentage of revenue, finance costs in 2Q21 was 1.5% compared to 4.4% in 2Q20.

Comparing 1H21 with 1H20, finance costs decreased by 31% or $0.7 million.

Share of Loss from Equity-Accounted Associate

Share of loss amounted to $0.2 million in 2Q21 was due to the 43.9% equity-accounted associate, Aoxin Q & M. Share of profit in 2Q20 includes the share of profit from Aidite which was disposed by the Group in 1Q21.

Profit Before Tax and Net Profit

For the reasons given above, the Group’s profit before tax increased by 66% from $7.6 million in 2Q20 to $12.6 million in 2Q21.

After deducting provision for income tax expense of $1.2 million, the Group’s net profit increased by 51% from $7.6 million in 2Q20 to $11.4 million in 2Q21.

For 1H21, the Group’s net profit after tax increased by 142% from $8.9 million in 1H20 to $21.5 million in 1H21.

Profit after tax attributable to owners of the parent increased by 119% from $8.1 million in 1H20 to $17.8 million in 1H21.

Statement of Financial Position

As at 30 June 2021, the Group has cash and cash equivalents of $43.9 million, bank borrowings plus finance leases amounted to $83.7 million.

Current Assets

Cash and cash equivalents as at 30 June 2021 decreased to $43.9 million from $48.8 million as at 31 December 2020. The decrease of $4.9 million was mainly due to dividend payment of $31.5 million to shareholders offset by proceeds from new term loan of $10.0 million, $17.0 million of net proceeds from disposal of the balance 12.246% of equity-accounted associate, Aidite and net cash generated from operations.

Trade and other receivables as at 30 June 2021 increased to $32.4 million from $18.2 million as at 31 December 2020. The increase of $14.2 million was mainly due to increase in trade receivables from the medical laboratory Covid-19 testing business and profit guarantee receivables from vendors of the associate.

Other assets as at 30 June 2021 increased to $3.6 million from $3.2 million as at 31 December 2020. The increase of $0.4 million was mainly due to an increase in sign on bonus for dentists.

Non-Current Assets

Investment in associates as at 30 June 2021 decreased to $31.8 million from $43.7 million as at 31 December 2020. The decrease of $11.9 million was mainly due to the disposal of the balance 12.3% of equity-accounted associate, Aidite.

Other assets as at 30 June 2021 decreased to $7.0 million from $8.6 million as at 31 December 2020. The decrease of $1.6 million was mainly due to the redemption of $1.9 million redeemable preference shares held in trust in Aidite as a result of the disposal of the balance 12.3% of equity-accounted associate, Aidite and offset by an increase in sign on bonus for dentists.

Other Intangible Assets

Other Intangible assets as at 30 June 2021 increased to $3.1million from $2.4 million as at 31 December 2020. The increase of $0.7 million was mainly due to the cost for developing the ethical enhanced artificial intelligence dental healthcare software.

Current Liabilities

Other financial liabilities as at 30 June 2021 decreased to $0.6 million from $1.9 million as at 31 December 2020. The decrease of $1.3 million was mainly due to redemption of bank loan.

Lease liabilities arising from right-of-use (“ROU”) assets as at 30 June 2021 decreased to $8.4 million from $9.1 million as at 31 December 2020. The decrease of $0.7 million was mainly due to the expiry of leases less than one year that has yet to be renewed.

Non-Current Liabilities

Other financial liabilities as at 30 June 2021 increased to $83.2 million from $75.5 million as at 31 December 200. The increase of $7.7 million was mainly due to proceeds from new term loan of $10.0 million offset by the redemption of redeemable preference shares held in trust in Aidite.

Lease liabilities from ROU assets as at 30 June 2021 decreased to $45.2 million from $42.1 million as at 31 December 2020. The decrease was mainly due to the repayment of the operating lease and reclassification from non-current liabilities to current liabilities.

Statement of Cash Flows

The Group generated net cash flow from operating activities of $4.7 million in 2Q21. This was mainly derived from the profit generated in 2Q21 offset by an increase in trade and other receivables.

Net cash from investing activities in 2Q21 amounted to $16.0 million, mainly due to proceeds from the disposal of balance 12.3% of equity-accounted associate, Aidite, offset by purchase of plant and equipment for the existing clinics and new dental clinics.

Net cash used in financing activities in 2Q21 was $16.3 million, mainly due to dividend payment to shareholders.

Consequent to the above factors, the Group’s cash and cash equivalents was $43.9 million as at 30 June 2021.

Commentary

Industry Prospects

Singapore has embarked on a strategy to open up the economy by moving from pandemic to endemic policy mode focusing on faster vaccinations, contact tracing and aggressive testing so that the economy can reopen with the least disruption to business activities. Currently the highly contagious Delta variant has led to the emergence of new clusters and the revision to Phase 2 (Heightened Alert) from 22 July 2021 to 18 August 2021.

Malaysia has lifted the Emergency Act on 1 August 2021 which was imposed in January 2021 to control the spread of Covid-19. Although Covid-19 infection rate has gone up, the Government is actively ramping up Covid-19 vaccinations to bring down the Covid-19 infection rate.

Barring any unforeseen circumstances and possible worsening of the Covid-19 situation leading to another lock down in Singapore, there are no known significant changes in the trends and competitive conditions of the industry in which the Group operates and no other major known factors or events that may adversely affect the Group in the next reporting period and the next 12 months.

Recent Developments

Update on the Company’s Singapore Operations

In June 2021, the Company has opened 1 new clinic in Jurong Yuhua. The Company has also secured location to open 6 new dental clinics island wide and are expected to commence operations by 4Q21. In summary, the Company has added 10 new clinics to its network YTD 2021 and is targeting to open another 10 new clinics by 4Q21.

Update on the Company’s Malaysia Operations

Due to the worsening Covid-19 infection rate in Malaysia, the Company is evaluating the opening of new clinics until the vaccination rate increases and the Covid-19 infection rate decreases.

Award of Tender to Acumen Diagnostics Pte. Ltd. (“Acumen”) for Covid-19 Swab and Testing Services

On 18 May 2021, the Company announced that Acumen, the Group’s 51% subsidiary, was one of the six successful awardees of an open tender exercise by the Health Promotion Board (“HPB”) for the provision of Covid-19 swab and testing services. Acumen will be a panel service provider of the HPB in respect of the provision of the Covid-19 swab and testing services.

On 4 June 2021, the Company is pleased to announced that Acumen had on 2 June 2021 been granted approval by Ministry of Health to provide offsite Covid-19 Polymerase Chain Reaction (PCR) swab and serology services at former Siglap Secondary School as well as any approved sites appointed by HPB pursuant to the Tender.

Announcement of Arbitral Award

On 29 May 2021, the Company announced that the arbitral tribunal has issued an arbitral award in favour of the Group’s wholly-owned subsidiary, Q & M Dental Group (China) Pte. Ltd. (“QDGC”), ordering Dr. Lou Tie Ying to make a payment of $3.3 million to QDGC. Following the arbitral tribunal’s decision, the Company is in process of obtaining legal advice from PRC legal counsel to enforce the award in the PRC. We will recognise this gain only upon recovery of the amount.

Proposed Investment for the Establishment of a Surgical Mask Manufacturing Company - Termination

On 29 May 2021, the Company announced that the non-binding memorandum of understanding (“MOU”) with Hubei Aishubao Living Supplies Co., Ltd. and Guangzhou Pharmasen Co., Ltd. in respect of the proposed establishment of a surgical mask manufacturing company as a joint venture company (‘Proposed Investment”) will terminate as the Proposed Investment was not entered into within one year of the date of the MOU.

Proposed Bonus Issue of up to 157,461,725 New Ordinary Shares in the Capital of the Company on the Basis of 1 Bonus Share for Every 5 Existing Ordinary Shares in the Capital of the Company Held by Shareholders

On 13 August 2021, the Company announced the proposal of a bonus issue of 157,461,725 new ordinary shares in the capital of the Company on the basis of 1 bonus shares to be credited as fully paid for every 5 existing shares in the capital of the Company held by shareholders of the Company as at the record date to be determined by the Directors for the purpose of determining the entitlement of the shareholders. This bonus shares will not be entitled to the 2nd interim dividend of 1 cent per share to be paid on 3 September 2021.

Future Plans

The Group intends to continue executing the business plans outlined below.

Expansion of network of dental clinics in Singapore and Malaysia

Currently, the Group operates 87 clinics in Singapore. The Group will be focusing on its operation in Singapore and has initiated a strategy of intensive organic growth of its dental clinics in Singapore. It will expand its team of dentists to support the future growth of its operations in Singapore. We will continue to develop, invest and optimise our digital Artificial Intelligence (AI) ethical enhanced guided treatment plan to provide the most effective and suitable treatment plans for patient. The Group believes it is well-positioned to cater to the rising demand for primary and higher value specialist dental healthcare services to its patients/customers.

Currently, the Group operates 37 clinics in Malaysia. The clinics are 15 dental clinics in Johor, 16 dental clinics in Kuala Lumpur and 5 dental clinics in Malacca.

The Group intends to open at least 30 dental clinics a year from 2021 onwards in Singapore and Malaysia for the next 10 years. The eventual number of dental outlets will depend on available opportunities, pertinent market conditions and the evolving Covid-19 situation.

Expansion into private dental healthcare market in the People’s Republic of China (“PRC”)

The main thrust of the Group’s proposed expansion in PRC is through organic growth to develop a new and sustainable growth pillar that can yield long term value for the Group.

Expansion in Southeast Asia

The Group is continuously looking for opportunities to expand its business through opening new dental clinics in Southeast Asia.

Covid-19 Business

The Group will focus on improving the efficiency and productivity of our testing capacity through automation to support the Government efforts focusing on testing to help to reopen the economy. We see new opportunities to further support the Government efforts to fight Covid-19 through swabbing and vaccination services.