2018 February 23, 2018

were doctor fees, nurse and staff costs, and drugs & medical supplies. The increase was mainly from salary raise and increase of specialists to suppor...

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AT THG 14/2018 February 23, 2018 Thonburi Healthcare Group PLC. 2017 Management Discussion and Analysis 4Q17 Performance As for 3- month performance of 4Q17, THG had total revenue of THB1,738mn, increasing by 10. 9% from THB1,567mn in 4Q16 due to revenue increase from domestic hospitals and from staff training, consulting and comprehensive studies contracts overseas. In 4Q17, THG’ s total cost was THB1,229mn, increasing by 7. 3% from THB1,145mn in 4Q16 because of revenue growth of medical service business led to higher variable cost, namely doctor fees and drugs & medical supplies. However, revenue growth still exceeded cost increase. As for selling, general and admin expenses, it was THB296mn in 2017, increasing by 45% from THB204mn in 2016. The main increase was from staff cost and marketing expenses, as well as recognition of expenses from studies and project development. 4Q17 EBITDA was THB337mn, increasing by 15.0% from THB293mn in the same quarter of 2016. Net profit for the parent company in 4Q17 was THB158mn, increasing by 48.9% from THB106mn in 4Q16. It was mainly due to the increase of revenue and better cost management when compared to revenue growth. Total cost increased by 7.3% while the revenue growth was 10.9%. Financial cost decreased by THB17mn or 32.7% because THG negotiated with financial institutions for lower interest rates, and in December 2017, THG used IPO proceed to repay bank debts. Also, income tax decreased when compared to net profit before income tax because of deferred income tax. Income tax in 2017 was THB118mn, and when compared to net profit before income tax, the tax rate was 17.3%, lower than 2016 of THB160mn or 22.7% FY2017 Performance Revenue THG’s revenue comprises of revenue from medical service, healthcare solution provider and other businesses. Total revenue of 2017 was THB6,612mn, increasing by 6.1% from THB6,229mn in 2016 due to revenue increase from domestic hospitals and from staff training, consulting and comprehensive studies contracts from overseas. Medical service Business: 2017 revenue was THB 6,172mn while it was THB5,815mn in 2016, increasing by 6.1%. • Domestic hospitals comprise of Thonburi Hospital, Thonburi 2 Hospital and Rajyindee Hospital. Total revenue was THB5,358mn, increasing from THB5,182mn in 2016. It was mainly due the increase in patient number and 1/7

treatment complexity of Thonburi and Thonburi 2 Hospitals. However, the revenue of upcountry hospital dropped because 2016 had high base from especially high patient volumes due to epidemic diseases. • Hospital management business saw revenue in 2017 of THB598mn, increasing from THB503mn in 2016. It was due to the business expansion overseas, namely staff training, consulting service and comprehensive studies. • Excellence Center business saw revenue of THB216mn in 2017, increasing from THB130mn in 2016 because of higher fees from renewed contract, in line with higher patient volume. Healthcare solutions provider This business comprises of dental equipment and supplies provider, chained drug stores and home healthcare. In 2017, the revenue was THB414mn, increasing by 5. 1% from THB394mn in 2016. The growth was from dental equipment turnkey service provided for Faculty of Dentistry. Home healthcare business also grew due to higher number of customers. Other businesses It comprises of hospital software development business and project development for healthcare service. In 2017, the revenue was THB26mn, increasing by 36. 8% from THB19mn in 2016 due to customer base expansion to overseas market leading to higher revenue. Costs In 2017, total cost was THB4,781mn, increasing by 5.8% from THB4,518mn in 2016, which was in line with total revenue growth. Major cost of THG was from core business in medical service. Details of costs are as follows. Cost of medical service was THB4,488mn in 2017, increasing by 5.7% from THB4,244mn in 2016. Main costs were doctor fees, nurse and staff costs, and drugs & medical supplies. The increase was mainly from salary raise and increase of specialists to support the clinic and excellence center. Cost of Healthcare solutions provider in 2017 was THB277mn, increasing by 6. 2% from THB261mn in 2016. The main cost was cost of goods sold. In 2017, the higher cost was due to turnkey project for Faculty of Dentistry that did not exist in 2016. Cost of other businesses was THB16mn in 2017, increasing by 23. 1% from THB13mn. Main cost was from staff cost in hospital software development business. The increase was due to higher headcounts to support overseas projects.

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Selling, general and administrative expenses In 2017, SG&A and management remuneration was THB1,005mn, increasing by 17. 5% from THB855mn in 2016. The increase was from staff cost and marketing expenses, as well as expenses from studies and project development. Financial cost Financial cost in 2017 was THB161mn, decreasing by 9.0% from THB177mn in 2016 because THG negotiated with financial institutions for lower interest rates, and in December 2017, THG used IPO proceed to repay bank debts. Profit Gross profit in 2017 was THB1,830mn, increasing by 7. 0% from THB1,710mn in 2016. Gros profit margin slightly increased to 27.7% from 27.5%. The slight increase was contributed by higher revenue in 4Q17 while most of costs increased since the beginning of the year, especially staff cost that increased from service development. That caused the gross profit margin to increase slightly. 2017 net profit attributable to the parent was THB554mn, increasing by 8. 4% from THB511mn in 2016. Net profit margin attributable to the parent slightly increase to 8.4% while it was 8.2% in 2016.

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Financial Highlights Consolidated financial statements Profit and loss statements (million baht)

4Q17

4Q16

Change

FY2017

FY2016

Change

1,631

1,451

12.4%

6,171

5,815

6.1%

Revenue from Healthcare solution provider

87

113

-23.0%

414

395

4.8%

Revenue from other businesses

19

3

533.3%

26

19

36.8%

1,737

1,567

10.8%

6,611

6,229

6.1%

(1,164)

(1,067)

9.1%

(4,488)

(4,244)

5.7%

(57)

(74)

-23.0%

(277)

(261)

6.1%

(8)

(4)

100.0%

(16)

(13)

23.1%

(1,229)

(1,145)

7.3%

(4,781)

(4,518)

5.8%

508

422

20.4%

1,830

1,710

7.0%

(296)

(204)

45.1%

(1,005)

(855)

17.5%

EBITDA

337

293

15.0%

1,147

1,121

2.3%

Financial cost

(35)

(52)

-32.7%

(161)

(177)

-9.0%

Net profit

164

115

42.6%

565

544

3.9%

Net profit - parent

158

106

49.1%

554

511

8.4%

Revenue from medical service

Total revenue Cost from medical service Cost from Healthcare solution provider Cost from other businesses Total cost Gross profit Selling, general and admin expenses

Margin

4Q17

4Q16

FY2017

FY2016

Gross profit margin

29.3%

26.9%

27.7%

27.5%

EBITDA margin

19.4%

18.7%

17.4%

18.0%

9.1%

6.8%

8.4%

8.2%

Net profit margin - parent

Financial status Assets As of 31 December 2017, THG had total assets of THB14,010mn, increasing by 33.9% from THB10,460mn as of 31 December 2016. Current assets increased from - account receivables and others of THB217mn, mainly from overseas customers in consulting services and domestic customers from medical service - cost from healthcare project of THB972mn, which was mainly from healthcare mixed-use project 4/7

Non-current assets increased from - lease right of land and building of THB2,360mn because THG acquired 99.99% shares of Bumrung Muang Plaza Co. Ltd. (BMP) from Power Line Engineering PLC. (PLE) and existing shareholders in order to acquire the lease right of land and building belonging to Thai Red Cross. The acquisition aims for developing Thonburi Rehab Hospital (Bumrung Muang Road). - investments, such as investment in JV. The investments were in JV of Ar Yu International Healthcare Company Limited, and in long-term equity investment because Ratchaphruek Hospital PLC. was listed in SET, so the investment was moved from investment in other companies to long-term equity investment and recorded with fair value. Liabilities As of 31 December 2017, THG’s total liabilities were THB5,345mn, increasing by 0.8% from THB5,304mn as of 31 December 2016. Most of them was long-term debt from financial institutions. However, debts decreased from 31 December 2016 because the debt was repaid by IPO proceed. Equity As of 31 December 2017, THG’ s equity was THB8,665mn, increasing by 68. 1% from THB5,156mn. It was mainly from the IPO of THB3,123mn, the increase of 2017 net profit of THB547mn and others of THB110mn. However, there was a dividend payment of THB306mn for 2016 performance.

Consolidated financial statements Statements of financial position (million baht)

End of 2017

End of 2016

Change

2,615

1,419

84.3%

Non-current assets

11,395

9,041

26.0%

Total assets

14,010

10,460

33.9%

Current liabilities

1,279

2,570

-50.2%

Non-current liabilities

4,066

2,734

48.7%

Total liabilities

5,345

5,304

0.8%

Total equity

8,665

5,156

68.1%

Current assets

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Consolidated financial statements 2017

Financial ratios

2016

Current ratio

2.4

0.6

Return on assets (%)

4.8

6.1

Assets turnover (times)

0.6

0.7

15.1

15.1

Debt/ equity

8.7

1.0

Interest bearing debt/ EBITDA

3.2

3.6

Interest coverage ratios (times)

5.3

5.0

Return on equity (%)

Capital management - Cashflow from operating activities: In 2017, it was THB713mn, compared to THB829mn in 2016. The change was from the increase of account receivables and others of THB215mn, mainly due to the accrued income from consulting fees to overseas customers in 4Q17. - Cashflow from investment: In 2017, it was THB1,516mn, compared to THB2,526mn in 2016. The change was from THG invested in Bumrung Muang Plaza Co. Ltd., JV in Myanmar and in capital increase for JV in China. The cashflow from investing activities was lower than in 2016. - Cashflow from financing activities: In 2017, it was THB824mn, compared to THB1,543mn in 2016. The change was from the repayment of loans to financial institutions. In 2017, net cash outflow to financial institutions was THB1,986mn* while it was net cash inflow of THB371mn from financial institutions in 2016.* *calculated from cash inflow from loan deducted by loan repayment

Consolidated financial statements End of 2017

Statement of cashflow (million baht)

End of 2016

Cashflow from operating activities

713

829

Cashflow from investing activities

(1,516)

(2,526)

Cashflow from financing activities

824

1,543

21

(154)

582

560

Net increase of cash and cash equivalents Cash and cash equivalents at the end of period

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Please be informed accordingly. Yours Sincerely, Thonburi Healthcare Group Public Company Limited (Ms. Suwadee Puntpanich) Company Secretary

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