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Condensed Financial Statement And Dividend Announcement For The First Half Ended 30 June 2024 (“1H24”)
Condensed Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income
Condensed Interim Statements of Financial Position
Review of Performance
Statement of Comprehensive Income
Revenue
As at 30 June 2024, the Group has 104 dental outlets, 5 medical outlets and 1 dental college in operations in Singapore, compared to 107 dental outlets, 5 medical outlets and 1 dental college as at 30 June 2023.
As at 30 June 2024 and 30 June 2023, the Group has 44 dental outlets in Malaysia.
As at 30 June 2024 and 30 June 2023, the Group has 1 dental equipment & supplies distribution company and a medical laboratory company in Singapore and 1 dental equipment & supplies distribution company in Malaysia.
The revenue contribution from dental and medical clinics increased by 4% from $78.9 million for the first six months ended 30 June 2023 (“1H23”) to $82.2 million for the six months ended 30 June 2024 (“1H24”). The increase of $3.3 million was mainly due to higher revenue contribution from Singapore dental clinics offset by lower profit guarantee income in 1H24.
The revenue contribution from medical laboratory and dental equipment & supplies decreased by 20% from $8.3 million in 1H23 to $6.6 million in 1H24. The decrease of $1.7 million was mainly due to lower revenue contribution from the Group’s medical laboratory business as well as lower revenue contribution from the dental equipment & supplies companies in Singapore and Malaysia.
Other Gains (Losses) – Net
Net other gains of $1.8 million was mainly due to gain on disposal of EM2AI as well as compensation from ex-vendors for the settlement and termination deed for Shanghai Chuangyi Investment & Management Co., Ltd. and ex-vendors from AR Dental Supplies Sdn. Bhd.
Other Items of Expense
Consumables and Supplies Used in Dental & Medical Clinics
Consumables and supplies used remains the same at $6.6 million in 1H24 and 1H23.
As a percentage of revenue from the dental and medical outlets, consumables and supplies used in the dental and medical outlets in 1H24 was 8.1% compared to 8.4% in 1H23.
Cost of Sales from Medical Laboratory and Dental Equipment & Supplies
The cost of sales from medical laboratory and dental equipment & supplies decreased by 25% from $4.0 million in 1H23 to $3.0 million in 1H24. The decrease of $1.0 million was due to the decrease in revenue of the medical laboratory business as well as decrease in revenue of the dental equipment & supplies company in Singapore and Malaysia.
As a percentage of revenue from medical laboratory and dental equipment & supplies, cost of sales used in medical laboratory and dental equipment & supplies in 1H24 was 45.2% compared to 48.0% in 1H23.
Depreciation and Amortisation Expense
Depreciation and amortisation expense increased by 4% from $2.4 million in 1H223 to $2.5 million in 1H24. The increase of $0.1 million was mainly due to higher depreciation and amortisation expense from dental clinics in Singapore in 1H24.
As a percentage of revenue, depreciation and amortisation expense remains the same at 2.8% in 1H24 and 1H23.
Other Expenses
Other expenses decreased by 6% from $5.9 million in 1H23 to $5.5 million in 1H24. The decrease of $0.4 million was mainly due to decrease in legal and professional fees, entertainment expense as well as printing and stationary expense for the Group’s Singapore operation.
As a percentage of revenue, other expenses in 1H24 was 6.2% compared to 6.7% in 1H23.
Finance Costs
Finance costs decreased by 3% from $2.8 million in 1H23 to $2.7 million in 1H24. The decrease of $0.1 million was due to lower interest expense in 1H24.
As a percentage of revenue, finance costs in 1H24 was 3.0% compared to 3.2% in 1H23.
Share of Profit / (Loss) from Equity-Accounted Associates
The Group recorded a share of profit from equity-accounted associates of $0.2 million in 1H24 mainly due to Aoxin Q & M turning from a loss in 1H23 to profit in 1H24.
Profit Before Tax and Net Profit After Tax
The Group’s profit before tax increased by 72% from $6.8 million in 1H23 to $11.7 million in 1H24. After deducting provision for income tax expense of $1.5 million, the Group’s net profit increased by 78% from $5.7 million in 1H23 to $10.2 million in 1H24.
Profit after tax attributable to owners of the parent increased by 84% from $5.3 million for 1H23 to $9.8 million for 1H24.
Statement of Financial Position
As at 30 June 2024, the Group has cash and cash equivalents of $32.3 million while bank borrowings plus finance leases amounted to $76.5 million. As at 31 December 2023, the Group has cash and cash equivalents of $34.0 million while bank borrowings plus finance leases amounted to $80.3 million.
Current Assets
Trade and other receivables as at 30 June 2024 increased to $35.8 million from $31.2 million as at 31 December 2023. The increase of $4.6 million was mainly due to the loan amount due from EM2AI Pte. Ltd. now recognised as a third-party receivables following the deconsolidation exercise in March 2024 and increase in profit guarantee receivables offset by decrease in trade receivables from the medical laboratory and the Group’s medical clinics as well as credit card and NETS receivables from the Singapore dental clinics.
Other assets as at 30 June 2024 decreased to $3.5 million from $3.6 million as at 31 December 2023. The decrease of $0.1 was mainly due to amortisation of sign on bonus to dentists in 1H24.
Non-Current Assets
The net book value of ROU asset as at 30 June 2024 decreased to $42.9 million from $46.6 million as at 31 December 2023. The decrease of $3.7 million was due to depreciation of the ROU assets offset by renewal of ROU assets.
Investment in associates as at 30 June 2024 increased to $25.9 million from $24.6 million as at 31 December 2023. The increase of $1.3 million due to the deconsolidation of EM2AI from a subsidiary to an associate of the Group as well as share of profit from equity-accounted associate, Aoxin Q & M in 1H24.
Other intangible assets as at 30 June 2024 decreased to $0.7 million from $$4.7 million as at 31 December 2023. The decrease of $4.0 million was mainly due to the deconsolidation of EM2AI from a subsidiary to an associate in March 2024.
Other receivables as at 30 June 2024 increased to $2.5 million from $2.4 million in 31 December 2023. The increase was due to increase in loan to dentists of the Company offset by the repayment of loan by the dentists of the Company.
Other assets as at 30 June 2024 decreased to $7.0 million from $8.0 million as at 31 December 2023. The decrease of $1.0 million was due to amortisation of sign on bonus for dentists.
Current Liabilities
Trade and other payables as at 30 June 2024 decreased to $16.7 million from $19.2 million as at 31 December 2023. The decrease of $2.5 million was mainly due to payment of professional fees to dentists, doctors and staff bonuses which were accrued as at 31 December 2023.
Other financial liabilities as at 30 June 2024 decreased to $0.5 million from $1.1 million as at 31 December 2023. The decrease of $0.6 million was due to decrease in bills payable from the dental equipment & supplies company in Malaysia.
Non-Current Liabilities
Lease liabilities from ROU assets as at 30 June 2024 decreased to $35.7 million from $39.2 million as at 31 December 2023. The decrease of $3.5 million was mainly due to repayment of operating lease offset by renewal of operating leases.
Other financial liabilities as at 30 June 2024 decreased to $76.0 million from $79.2 million as at 31 December 2023. The decrease of $3.2 million was due to repayment of bank loan.
Statement of Cash Flows
The Group generated net cash flow from operating activities of $17.3 million in 1H24. This was mainly derived from the profit generated from operations in 1H24 offset by decrease in trade and other payables, increase in trade and other receivables and income taxes paid.
Net cash used in investing activities in 1H24 amounted to $1.1 million, mainly due to the purchase of plant and equipment for the existing and new dental clinics off set by decrease in sign on bonus for dentists.
Net cash used in financing activities in 1H24 was $17.9 million, mainly due to repayment of lease liabilities arising from right-of use assets, dividend payment to shareholders and repayment of bank loans.
Consequent to the above factors, the Group’s cash and cash equivalents was $32.3 million as at 30 June 2024.
Commentary
Industry Prospects
Barring any unforeseen circumstances, 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
Placement of 520,000 Treasury Shares in the Capital of Q & M Dental Group (Singapore) Limited
On 24 June 2024, the Company transferred 520,000 ordinary shares from its treasury shares to 3 key dentists of the Group for an aggregate gross cash consideration of $130,000.
As at 30 June 2024, the Company has not utilised the proceeds raised from the placement for general working capital purposes.
Update From Acumen Diagnostics Pte. Ltd. (“Acumen”)
On 29 June 2024, the Company announced that Acumen, a subsidiary of the Company, had placed Dr. Ong Siew Hwa (“Dr. Ong”), the chief executive officer of Acumen, on a leave of absence. The Board understands that this is to facilitate investigations by the Acumen board into Dr. Ong’s acquisition of an indirect interest in the assets of a supplier of Acumen and ancillary issues arising from it. Dr. Ong is also an executive director of Aoxin Q & M Dental Group Limited, an associate company of the Group.
Announcement of Arbitral award
On 15 July 2024, the Company announced that the Group’s wholly-owned subsidiary, Q & M Dental Group (Malaysia) Sdn Bhd (“QDGM”), obtained an arbitral award from the Singapore International Arbitration Centre against (i) Tye Chee Wah (“TCW”); (ii) Chong Vooi Seong (“CVS”); (iii) Chan Sing Cheong (“CSS”), who are the remaining 30% shareholders of AR Dental Supplies Sdn Bhd (“AR Dental”), as well as (iv) Pride Access Sdn Bhd (“Pride Access”, and collectively with TCW, CVS and CSS, the “Respondents”).
Grant of Award of Ordinary Shares Pursuant to the Q & M Performance Share Plan 2018
On 20 July 2024, the Company announced the following grant of awards of ordinary shares to certain employees pursuant to the Q & M Performance Share Plan 2018. A total of 1,962,880 shares were granted at a market price of $0.2750.
Future Plans
The Group intends to continue executing the business plans outlined below.
Expansion of network of dental clinics in Singapore and the Asia Pacific region
The Group is initiating a strategy of intensive organic growth of dental clinics and 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 guided clinical decision support system to provide the most effective and suitable treatment plans for our patients.
With rising standards of living and higher expectations of dental healthcare, especially in Singapore, the Group believes it is well-positioned to meet the rising demand for primary and high-value specialist dental healthcare services for its patients.
The Group is continuously looking for opportunities to expand its dental business in the Asia Pacific region.