STOCKHOLM, Sweden, May 15, 2002 (PRIMEZONE) -- Medicover:
- Revenue for the three months amounted to Euro 8.8 million (6.8), an increase of 29 percent versus last year. - Prepaid membership rose by 4,200 during the quarter to 95,000, an increase by 13,900 or 17 percent since last year. - The operating profit before depreciation (EBITDA) amounted to Euro 0.3 million (0.2). - The operating loss (EBIT) amounted to Euro 0.4 million for the quarter (0.2). - Medical costs on target and lower administrative costs - Cooperation with local insurance and banking institutions regarding new market segment - individual market in Poland. - Board decision to pursue a package sale of Medicovers investment portfolio
Continued strong growth
Despite difficult market conditions on our main market, I am pleased to report a good first quarter, with a continued good growth in revenue and improving operating performance. Revenue increased by 29 percent versus the corresponding period last year to Euro 8.8 m. Our prepaid membership base increased by a healthy 4,200 new members to reach a total of 95,000.
The operating deficit (EBIT) amounted to Euro 0.4 million (0.2) and Euro 1.2 m. for the previous quarter. The operating result before depreciation (EBITDA) improved to a profit of Euro 0.3 m. (0.2) and a loss of 0.5 m. for the previous quarter. The improved operating performance versus the previous quarter is a result of better outcome of medical costs and a continued focus on cost control.
We achieved a medical cost ratio of 60 percent for the quarter, which was 2.4 percent higher than last year but a significant drop versus the previous quarter's 65 percent, reflecting primarily a lower member service utilisation rate of our medical facilities. During the quarter no additional medical fixed capacity was taken on.
Administrative costs amounted to Euro 2.2 m. or 24.9 percent of revenue versus Euro 1.7 m. or 25.4 percent of revenue for the same period last year and 25.1 percent for the full year 2001. We expect to see administrative costs to continue to fall as a percentage of revenue.
Sales, marketing and distribution costs amounted to Euro 1.1 m. or 12.2 percent of revenue versus Euro 0.9 m. or 13.6 percent of revenue for the first quarter last year and 13.6 percent of revenue for the full year 2001. Also this cost category will continue to drop as a precentage of a growing revenue.
Poland - New products launched
Medicover Poland increased revenue for the quarter to Euro 5.9 m., a 15 percent increase versus the same period last year. The prepaid membership base increased by 2,100 during the quarter to a total of 74,500
Our focus is to build momentum in the growth in the Polish membership base. This will be achieved both through ensuring a continued strong new sales activity and by improving growth within the existing accounts, in line with the expected pick up in the Polish economy during the second half of the year. A positive sign in this direction being that the annualised value of our Polish prepaid contracts increased by more than 6 percent during the first quarter expressed in local currency, approximately 25 percent of this growth came through growing existing business.
During the quarter we launched a new product in Poland, named Blue Prestige Plan and we also increased the range of benefits on the Silver and Gold Plan levels. The Blue Prestige Plan offers all the benefits of the traditional Blue Plan and in addition provides the Medicover hospital access on a fee-for-service basis and provides also a comprehensive foreign travel and medical assistance and insurance benefit. The international benefit, which we have developed together with AIG, the large international insurance group, provides a complete international assistance and support network for any medical related problem. By combing Medicover's domestic healthcare coverage with an international support network, we offer a complete solution for the travelling executive or the international traveller.
We have added the international benefits on to our existing Silver and Gold Plans as a loyalty rewards for existing corporate clients. These benefits will also be replicated into the other markets during the coming quarters.
We have developed our first major product and distribution initiative for the individual market during the quarter. In partnership with one of the leading local banking and insurance groups we will be launching a targeted product offer to certain customer segments. The partner will provide distribution channel, customer base and a strong brand name. Medicover will provide our quality healthcare delivery system across all of Poland and the brand. We are looking forward to evaluating the results of this new market segment entry over the second half of the year.
During the quarter we continued to develop the medical provision network across Poland. By end of the quarter we had credentialed a total of 150 participating network practises. No new in house fixed capacity was taken on during the quarter.
Romania - Strong performance in the laboratory operation
Revenue in Romania continued to grow strongly on the back of good performance of the laboratory operation but also continued signs of momentum in the prepaid business. Revenue increased by a respectable 43 percent versus the same period last year to Euro 1.7 m. and a strong 23 percent versus the previous quarter. Growth in the prepaid business was 35 percent versus the same period last year. The prepaid membership base increased to 10,100. We start to see early signs that the improving performance of the Romanian economy is beginning to impact companies' attitudes towards providing healthcare benefits for their staff.
The Romanian Sales and Marketing organisation continued to develop during the period with several new additions being contracted.
We relocated our Bucharest office to a new facility, allowing more space in the previous location for the expanding laboratory business. During the month of April we began service in the newly constructed Medical Center at a textile plant in Focsani, a city 2 hours north of Bucharest. This facility will service close to 2,000 employees and their families with quality healthcare. The facility will be officially inaugurated by the Swedish Ambassador to Romania in early June.
Hungary - Doubled volume in the prepaid business
Medicover Hungary increased revenue by 48 percent versus last year to Euro 0.5 m. This was a combination of doubling volume in the prepaid business and a slight reduction in the fee-for-service revenue, reflecting an increased focus on building the prepaid customer base and a subsequent reduction in cash paying customers.
The prepaid membership base grew to 3,500 by quarter end. This was lightly below our expectations and we continue to focus management attention on ensuring solid membership growth is achieved throughout the year.
A new managing director for the Hungarian operation started during the quarter.
The new location in Budapest that opened during second half of last year continues to grow in popularity among our members. During the quarter, more than half of all prepaid member visits were serviced through this location.
Estonia - growth in prepaid business
Revenue in Estonia increased by 16 percent versus last year to Euro 0.2 m. The prepaid membership base increased by 200 to a quarter end total of 900. We continued to sign up new corporate clients for the mandated occupational health service contracts and continue our efforts to build on these, mostly cash paid services or low premium services, to generate growth in the regular prepaid full service business.
Czech Republic
Revenue in The Czech republic amounted to Euro 0.4 m. The number of prepaid members increased by 400 to a total of 6,000 by quarter end. We continue to work with integrating the Czech acquisition in the Group and have contracted several key management positions during the quarter. Sales show an encouraging development and we maintain our positive outlook to the opportunities for Medicover on the Czech market.
Investment activities - Evaluation of package sale of remaining portfolio
Our Russian investments have had a very mixed performance in the 1Q 2002. A very good return on our listed investments, most notably with Gazprom domestic with gains of Euro 0.6m, has been offset by a revaluation loss on our investment in the Russian Pharmaceutical distributor Invacorp of Euro 1.5 m. The situation in Invacorp deteriorated very rapidly at the beginning of 2002, and the company stopped trading in April 2002. Invacorp's problems were related to working capital management and a poorly planned introduction of VAT on pharmaceuticals that came into force at the beginning of 2002. The shareholders and main creditors are presently reviewing the situation. This investment performance is at odds with the rest of our remaining Russian investments and we have confidence that a reasonable return will be realised on our remaining unlisted investment in Russia, RIG restaurants.
We still feel that the valuation of our private equity portfolio reflects the underlying value of the various operations but the possibilities for exits continues to be uncertain and will stretch out in time. In the meantime small additional investments are likely to continue to be required to finance the continuing development of our unlisted portfolio until exits. One such investment of Euro 0.2m was made in the quarter, and several other continuing investments are likely in the rest of the year to avoid dilution and to take advantage of favourable performances.
The difficulties to evaluate timing of exits as well as future valuation creates uncertainty. It also uses up scarce management resources within the group and conflicts with the need to fully focus on the core business. To resolve this situation the Board of Directors have therefore authorised management to develop an investment memorandum and to evaluate the feasibility of finding a buyer for the whole portfolio of unlisted investments.
Investment management costs were Euro 0.2m. (0.4) which is likely to be the level on an ongoing basis until the majority of the investments are exited or the entire portfolio is sold.
Liquidity
Current assets amounted to Euro 10.0m., including Euro 3.1m. of listed shares, whilst payables, accruals and deferred revenue amounted to Euro 6.7m. In addition the group has unused loan facilities of Euro 3.8 m. In total the Group has Euro 6.0 m. in cash and undrawn loan facilities.
Financial costs
Financial costs for the quarter amounted to a net of Euro 0.5m. (0.2). Interest costs have risen in line with the increased debt levels, however reduction in interest earning assets with the sale of the portfolio of bonds at the end of 2001 have increased the net cost. Foreign exchange losses have increased, reflecting primarily the weakness of the Euro against the U.S. Dollar.
Organisation - New Group Sales Executive and Managing Director in Hungary
As previously commented we continue to build our management resources in further supporting our sales and marketing and product development efforts across all our markets. After a extended search effort we recently hired a Group Executive who will be responsible for this area. We believe this will further strengthen our opportunities across the region in serving both existing and new customers and build on today's momentum. During the quarter we also welcomed a new Managing Director to our Hungarian operation.
Outlook
Our short to mid term outlook in the Poland is closely related to the speed of recovery in the Polish economy. We maintain our view that the economy has bottomed out but that the timeframe until we will see sustainable improvement in economic fundamentals is still uncertain. We expect to see an improvement in Polish membership growth numbers on the back of this, particularly from resumed growth within existing accounts. Economic development and performance in the other markets are likely to remain strong. The elections in Hungary resulted in a switch in government but as we previously commented, we do not expect this to change any aspects of healthcare reform or market opportunities for private healthcare alternatives. We expect to see good membership growth coming out of both Hungary and Romania, and early signs for the Czech republic are encouraging.
Jonas af Jochnick
This information was brought to you by Waymaker http://www.waymaker.net
The following files are available for download:
www.waymaker.net/bitonline/2002/05/15/20020515BIT00030/wkr0001.doc The Full Report www.waymaker.net/bitonline/2002/05/15/20020515BIT00030/wkr0002.pdf The Full Report