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Public company info - Guangdong Kanghua Healthcare Co. Ltd.-H shares , 03689.HK

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Guangdong Kanghua Healthcare Co. Ltd.-H shares, 03689.HK - Company Profile
Chairman WANG Junyang
Share Issued (share) 84,000,000
Par Currency Renminbi
Par Value 1.0
Industry Medical Equipment & Services
Corporate Profile Business Summary: The Group is principally engaged in the provision of hospital services, provision of rehabilitation and other healthcare services, sale of pharmaceutical products and provision of other services (represents elderly healthcare services) in the PRC Performance for the year: Revenue for the year decreased by 10.8% to RMB1,745.0 million (2019: RMB1,955.5 million). Loss for the year amounting to RMB50.1 million (2019: profit of RMB48.7 million). Loss for the year attributable to owners of the Company amounting to RMB25.4 million (2019: profit of RMB74.3 million). Loss per share amounting to RMB7.6 cents (2019: earnings per share of RMB22.2 cents). Business Review The Group generates revenue primarily from: (i) hospital services – providing healthcare services through its owned hospitals, namely Kanghua Hospital, Renkang Hospital and Kangxin Hospital, comprising inpatient healthcare services, outpatient healthcare services and physical examination services; (ii) rehabilitation and other healthcare services – providing rehabilitation services to patients with physical or mental disabilities and other healthcare related services including elderly care and training service for the disabled; (iii) sale of pharmaceutical products and medical consumables to patients of the Group’s hospitals and walk-in customers who may not be patients of the Group’s hospitals; and (iv) others representing provision of elderly healthcare services. Revenue from the Group’s hospital services amounted to RMB1,620.5 million (2019: RMB1,848.2 million), representing a year-on-year decrease of 12.3% and accounting for 92.9% (2019: 94.5%) of the total revenue of the Group. Revenue from hospital services comprised (i) revenue from inpatient healthcare services amounted to RMB977.9 million (2019: RMB1,135.9 million), representing a year-on-year decrease of 13.9%, accounting for 56.0% (2019: 58.1%) of the total revenue of the Group; (ii) revenue from outpatient healthcare services amounted to RMB528.8 million (2019: RMB609.7 million), representing a year-on-year decrease of 13.3%, accounting for 30.3% (2019: 31.2%) of the total revenue of the Group; and (iii) revenue from physical examination services amounted to RMB113.7 million (2019: RMB102.6 million), representing a year-on-year increase of 10.8%, accounting for 6.5% (2019: 5.2%) of the total revenue of the Group. The decrease in revenue from hospital services is mainly due to (i) decrease in the number of inpatient, outpatient and physical examination visits due to the COVID-19 pandemic in the first half of year 2020, and to certain extent, offset by an increase in overall average spending; (ii) the decline in revenue across all of our major medical disciplines and our VIP special services. During the Reporting Period, the revenue from our VIP special services accounted for approximately 9.0% (2019: 9.3%) of the Group’s total revenue and 9.7% (2019: 9.8%) of the Group’s revenue from our hospital services segment. The decline in revenue from our hospital services is primarily caused by the decrease in the total number of patient visits which led to the decrease in healthcare services income during the period of the pandemic in the first half of year 2020. Although the number of physical examination visits has declined, revenue from physical examination services has increased as compared to year 2019. During the year, the Kanghua Hospital has entered a number of new physical examination service contracts with local corporates in Dongguan, and these service contracts are largely relates to the provision of higher valued services. The management is of the view that local corporates had raised health awareness for staff and employees after the pandemic, and increased willingness in spending on regular check ups and COVID-19 testing for employees. The Board is of the view that the decrease in total number of patient visits in year 2020 is largely temporary and the number of patient visits of our hospital has rebounded soon after the ease of the pandemic. Business operations and medical services revenue have substantially returned to normal level as compared with the corresponding period last year. The Board is of the view that the fundamental demand for our services remained strong and stable. Revenue from rehabilitation and other healthcare services amounted to RMB100.4 million (2019: RMB87.1 million), representing a year-on-year increase of 15.3%, accounting for 5.8% (2019: 4.5%) of the total revenue of the Group. Despite the operational disturbance, including temporary closures of our rehabilitation centres during the period of the COVID-19 pandemic, patient visits had substantially rebounded since mid-2020. In addition, the increase in revenue is largely contributed from Hefei Kanghua Rehabilitation Hospital (a rehabilitation specialty hospital aiming to be rated as a class III rehabilitation hospital) as its business operations began to mature and gain acceptance as well as reputation from the local community and the government. Revenue from the sale of pharmaceutical products and medical consumables amounted to RMB17.54 million (2019: RMB18.58 million), representing a year-on-year decrease of 5.6%, accounting for 1.0% (2019: 0.9%) of the total revenue of the Group. The pharmaceuticals and medical consumables trading operation was set up for the purpose of streamlining pharmaceuticals and medical consumables sales directly to the patients at the Group’s hospitals and walk-in customers who may not be patients of the Group’s hospitals. The decrease in revenue from the sale of pharmaceutical products and medical consumables is primarily due to the decrease in the number of outpatient visits in both Kanghua Hospital and Renkang Hospital during the period of the pandemic in year 2020. Revenue from the others segment represents income from provision of elderly healthcare services at Renkang Elderly Care Centre, which amounted to RMB6.62 million (2019: RMB1.67 million), representing a year-on-year increase of 296.4%, accounting for 0.4% (2019: 0.1%) of the total revenue of the Group. In June 2020, the second phase of the nursing home project passed the inspection of the Municipal Health Supervision Bureau and the Civil Affairs Bureau. In August 2020, the second phase of the elderly care centre commenced operation with the addition of 48 registered beds and became a designated medical institution covered by the social insurance system. The increase in revenue is mainly attributable to the increase in our operating capacity and intake of patients during the year. Prospects: In view of the impact of the COVID-19 pandemic in the PRC during year 2020, the authorities at the national level have commensurately realigned the policy of the entire healthcare industry. The pandemic and 5G technology have catalysed the rise of internet medical treatments. During the COVID-19 pandemic, given the environmental constraints, as well as the improving internet applications, the number of people seeking online medical consultation has significantly increased. Furthermore, medical informatisation has greatly improved the efficiency and workflow of medical services. The emergence of medical kiosks in our hospitals provides the conditions required for the transformation and upgrade in medical institutions. The National Health Commission, the State Food and Drug Administration and the National Health Security Administration have successively issued the “Notice for Further Improving Medical Consultation and Treatment Reservation System and Enhancing the Construction of Smart Hospitals” and other related documents, providing a route to upgrade and transform medical institutions. These initiatives also lay down key guidelines for construction of internet hospitals. In response, our hospitals expedited the construction work of internet hospitals. The government promotes centralised procurement and use of pharmaceutical products, and constantly introduces relevant policies aimed at lowering purchase prices of pharmaceutical products and regulating the procurement process. In April 2020, five government departments, including the National Health Security Administration, issued the “Notice on Launching National Work on Centralised Procurement and Use of the Second Batch of Pharmaceutical Products”, pursuant to which it is stated that the standardised and normalised method for centralised procurement of pharmaceutical products is established to carry out the comprehensive reform of strengthening centralised procurement and use of pharmaceutical products. Although such policy is only applicable to public hospitals, the Group makes reference to and assesses the centralized procurement model and its effectiveness, as such model may play a meaningful role in further reducing procurement costs and regulating procurement processes. The use of medical insurance funds has improved. The Dongguan Municipal Health Security Administration Bureau, the Dongguan Municipal Health Bureau and the Dongguan Municipal Finance Bureau simultaneously issued the “Notice on Printing and Distributing the Dongguan Municipal Efficiency Improvement Programme of the Use of Medical Insurance Funds” in accordance with the State Council’s recommended guidance. The notice emphasises that medical insurance funds must be utilised under the principle of “determining expenditure based on income, while maintaining a balance between income and expenditure with a surplus” (“以收定支、收支平衡、略有結餘”). In this regard, the income and expenditure budget for medical insurance funds shall be prepared scientifically and implemented strictly. For the purposes of graded medical consultation and treatment based on the city healthcare scheme driven by the medical insurance funds, such funds will strategically purchase basic medical services, which will encourage designated hospitals to actively regulate the medical consultation and treatment practices, as well as to improve the momentum to pursue medical quality. This notice strives for the transformation of designated hospitals from scale expansion to internal development, for the purposes of controlling the unreasonable growth in medical expenses and alleviating the financial burden on the insured. Furthermore, this notice aims to improve the efficient use of medical insurance funds and to advance the stable and sustainable development of the social medical security system. By implementing the abovementioned policies, we can further regulate medical consultation and treatment practices, and improve the quality of medical services. In the meantime, we can make use of this opportunity to develop the clinical trial advantages for various diseases, enhancing our competitiveness. The year 2021 is a year of global economic uncertainties in the post COVID-19 era, kicking off Kanghua Hospital’s fourth five-year plan. After 15 years of operation, Kanghua Hospital, under the leadership of its board of directors, has built up our own teams, strong disciplines, an extensive network of connections, and a reputable brand, based on our five core disciplines. Kanghua Hospital entered a period of stable operations, and has proved to have strong innovative capability and risk resilience. On the other hand, we also saw the rapid development of local public hospitals in 2020, which was supported by government policies, especially from the emergence of public hospitals as the primary source of healthcare under the background of prevention of control of COVID-19. The reform of payment methods under the medical insurance system forced us to change our business philosophy from extensive growth of income to optimising our income structure. In terms of the overall market, the competition among hospitals became more intense due to the impact of COVID-19 and the structure of the industry on local population and demographics, the division of market as a result of the development of integrated health care systems, and the improvement of service capability of primary healthcare hospitals. We also need to promptly address the historical issues accumulated within our hospitals during our rapid development in the past decades. In particular, with the introduction of the new standards for the assessment of classified hospitals, we must be well prepared for the upcoming assessment in 2024. As such, we must formulate a sound operational plan this year to address the rapidly changing policies and market environment, considering the actual situation at our hospitals.

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