ELDERLY CARE HOME ACQUISITIONS TO TAKE THE GROUP TO 1500 BEDS
HK$ 31.18 MILLION OPERATING PROFIT, AND
AFTER EXCEPTIONALS AND TAX PROFIT HK$ 22.16 MILLION
IN FIRST FULL YEAR
FIRM FOUNDATION BUILT FOR THE FUTURE
First Year Achievements
Brought together as an integrated healthcare group only in January last year, Quality HealthCare has made giant strides in our early life, including as follows :
| - Quality HealthCare Medical Services | - Primary and specialist care |
| - Quality HealthCare Elderly Services | - Elderly care centres and services |
| - Quality HealthCare Services | - Allied health services (nursing, physiotherapy, dentistry) |
| - Quality HealthCare Technologies & Services | - Innovative technology and services, plus medical equipment distribution |
Created the physical and management infrastructure to take us into future years as a competent, equipped, intelligent and responsive organisation.
The Group has determined, sometimes by trial and error, the way forward to take a leading position in each division and how to bring these together so that " the integrated Group is worth more than the sum of its parts ".
Financial Review
HK$ 31.18 MILLION OPERATING PROFIT, AND
AFTER EXCEPTIONALS AND TAX PROFIT HK$ 22.16 MILLION
IN FIRST FULL YEAR
Operating profit for the year amounted to HK$ 31,180,000 ( 1997 : loss of HK$ 16,604,000 ). The net profit after exceptional items and tax attributable to shareholders for the year was HK$22,159,000 ( 1997 : loss of HK$36,162,000 ). Earnings per Share were 3.9 cents ( 1997 : Loss per share of 14.4 cents ).
The turnover of the Group for the year was HK$ 331,326,000 ( 1997 HK$ 59,965,000 ).
Both turnover and operating profit were adversely affected in the second half by Hong Kong's economic recession. Few companies escaped the effects of the downturn, many closing down and others slashing both staffing and salary levels. Both public and private companies in the SAR have reported seriously depleted profits for the latter part of the year. QHMS could not escape the impact of corporate clients laying off staff, particularly in the fourth quarter, and some reduction in fee levels as every organisation in the Hong Kong sought to cut costs.
To maintain margins, and as part of the post-acquisition restructuring of the two medical practices, we reduced costs by making a number of staff redundant and by instigating other cost cutting measures. Inevitably, there are one-off costs implications with such actions. These, combined with legal, professional and other consultancy costs relating to the reorganisation of the medical services division, and other project costs, created exceptional costs of HK$ 7,068,000 ( 1997 : HK$19,629,000 ).
The Group believes that the tough market conditions, while having a short term financial impact, will prove beneficial in the medium term, by virtue of :
On the basis of the Group's plans for expansion in 1999, the Directors are not proposing a dividend for 1998.
Acquisitions
As a result of market conditions and the developed image of the Group as an industry leader, opportunities for acquisitions in the various industry sectors are regularly being presented.
As a result, today, we have added to a year of achievement by announcing that Quality HealthCare will take another significant step in our plan for growth.
In a separate announcement, the Group has reported entering into an agreement to acquire up to 1,016 elderly care beds from an established Hong Kong operator.
The first step is the acquisition of a 194-bed Home in Kwai Chung, coupled with an exclusive option to purchase homes operating the remaining 822 beds. As these further homes transfer to us under the deal, we are set to become the largest operator of licensed elderly care beds in the SAR.
Adding the above 1,016 beds to our existing 305 beds, and 178 under renovation, takes us to 1,499 beds.
The majority of the beds are licensed by the Social Welfare Department and any which are not presently licensed will achieve licensed status before we transfer ownership.
Of a simpler style than our own first homes, the acquired homes will be operated under our Conifer Elderly Services brand name. As it, and any other acquired homes, come to us, they will take on the Conifer identity, until we have made any necessary adjustments to their operation, which would then enable them to graduate to the Quality HealthCare branding.
While we plan to continue growing organically during 1999 and beyond, the Group will also seize sensible additional opportunities to expand by acquisition. We are confident that many such prospects exist in Hong Kong, particularly as the present economic downturn prevails.
Quality HealthCare has worked hard to achieve tremendous momentum in just over one year. It is the Group's intention to retain that momentum and stay acutely aware of the possibilities on the road ahead.
Government Outsourcing / Privatisation
This is a time when the whole topic of healthcare delivery and financing is the subject of new debate in Hong Kong. Government is now looking at private sector co-operation with new openness, as witnessed by the recent Budget speech.
We are particularly pleased to see the speech refer to the issue of outsourcing many services, which are presently offered by government departments, to the private sector and to see that quality in service was emphasised as a criterion.
Now is the time for the private sector to make itself ready to offer realistic and viable solutions as an alternative, to allow government the opportunity to become a buyer, rather than just a supplier, of healthcare services. Quality HealthCare is resolved to be part of the solution which government is seeking and is committed to taking up the challenge which it has presented.
For the Future
Our objectives for 1999, our second full year, are to :
The Group sees these economic times as an opportunity to continue building the Quality HealthCare brand and presence.
Contact:
| Brian O'Connor | Frank Wingate |
| Executive Chairman | Executive Vice President |
| Quality HealthCare Asia Limited | Chelgate Asia Limited |
| Tel: 2598 - 9133 | Tel: 2575 - 2701 |
| Fax: 2824 - 0308 | Fax: 2572 - 7804 |
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