New Frontier Health Corporation Announces Fourth Quarter and Fiscal 2020 Financial Results

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Rhea-AI Summary

New Frontier Health (NFH) reported a 2.2% increase in Q4 2020 revenue, reaching RMB654 million, as patient volumes rebounded post-COVID-19. Net loss shrank to RMB101.4 million from RMB251.6 million YoY, thanks to lower transaction costs from a business combination and cost-saving measures. Adjusted EBITDA surged 252.1% YoY to RMB90.5 million. However, total annual revenue fell 7.7% to RMB2.26 billion, reflecting pandemic-related declines in patient procedures. Expansion assets showed strong growth, with a 30% increase in Q4 revenue.

Positive

Q4 revenue increased by 2.2% YoY to RMB654 million.
Net loss decreased significantly from RMB251.6 million YoY to RMB101.4 million.
Adjusted EBITDA jumped by 252.1% YoY to RMB90.5 million.
Expansion assets revenue grew by 30% YoY in Q4.

Negative

Annual revenue declined by 7.7% to RMB2.26 billion.
Omni-channel patient volume decreased due to COVID-19 impact.

04/08/2021 - 06:00 AM

New Frontier Health Corporation (“NFH” or “the Company”) (NYSE: NFH), operator of the premium healthcare services provider United Family Healthcare ("UFH"), today announced its financial results for the fourth quarter and fiscal year ended December 31, 2020.

Financial and Operating Highlights¹

All comparisons made on both a year-over-year (“yoy”) and quarter-on-quarter (“qoq”) basis.²

For the Quarter Ended December 31, 2020:

Revenue increased by 2.2% yoy to RMB654.0 million from RMB639.7 million and increased by 4.4% from the prior quarter, as patient volume recovered from the COVID-19 pandemic onset.
Net loss decreased to RMB101.4 million from RMB251.6 million in the prior year period and increased from RMB69.8 million in the prior quarter. The yoy decrease was mainly due to the RMB148.4 million decrease in transaction costs related to the Company’s business combination, increased patient volume and strong revenue growth month-over-month in the fourth quarter of 2020, ongoing implementation of cost-saving initiatives, and overall cost reductions as a result of government policies in response to the COVID-19 pandemic, which offset an increase in finance costs related to the Company’s senior secured credit facility that it entered into in connection with the closing of the business combination (the “Senior Secured Term Loan”). The qoq increase was mainly attributable to an increase in promotion and marketing expenses from a series of promotional activities held in the fourth quarter of 2020 and an increase in exchange loss due to the appreciation of RMB as compared to the U.S. Dollar in the fourth quarter of 2020.
Adjusted EBITDA (before IFRS 16 adoption)³ increased by 252.1% yoy to RMB90.5 million from RMB25.7 million and increased by 0.6% from the prior quarter. The increase was primarily due to revenue recovery and the implementation of permanent and temporary cost savings initiatives, as well as revenue ramp-up from expansion assets.
Tier 1 Operating Assets: revenue increased by 0.8% yoy to RMB465.7 million from RMB462.2 million and increased by 4.4% qoq. Adjusted EBITDA (before IFRS 16 adoption) increased by 15.3% yoy to RMB124.0 million from RMB107.6 million. The yoy increases in revenue and Adjusted EBITDA were primarily attributable to recovery of patient volume across various specialties and ongoing implementation of permanent and temporary cost controls.
Tier 2 Operating and Other Assets: revenue decreased by 14.3% yoy to RMB82.2 million from RMB95.9 million, primarily as a result of decreased patient volume due to lower birth rates in 2020 and lower overall pediatric patient volume. Adjusted EBITDA (before IFRS 16 adoption) increased to RMB4.3 million from RMB0.6 million due to continued implementation of permanent and temporary cost controls.
Expansion Assets: revenue increased by 30.0% yoy to RMB106.2 million from RMB81.6 million due to strong growth of the new hospitals in Guangzhou and Pudong, Shanghai. Adjusted EBITDA (before IFRS 16 adoption) improved by 72.5% yoy to RMB(10.2) million from RMB(37.0) million due to the ongoing ramp-up of expansion assets.

For the Fiscal Year Ended December 31, 2020:

Revenue decreased by 7.7% to RMB2,260.5 million from RMB2,449.2 million due to an overall decrease in patient volume and the number of procedures performed as a result of the COVID-19 pandemic in the first half of 2020.
Net loss decreased to RMB419.1 million from RMB458.7 million, mainly due to the RMB 157.0 million decrease in transaction costs from the business combination, implementation of permanent and temporary cost-saving initiatives, and cost reductions as a benefit of government policies in response to the COVID-19 pandemic, which offset an increase in finance costs relating to the Senior Secured Term Loan.
Adjusted EBITDA (before IFRS 16 adoption) increased by 16.1% to RMB166.7 million from RMB143.6 million, mainly due to the implementation of cost controls and ramp up of expansion assets in Guangzhou and Pudong, Shanghai.
Tier 1 Operating Assets: revenue decreased by 11.9% to RMB1,596.1 million from RMB1,810.7 million. Adjusted EBITDA (before IFRS 16 adoption) decreased by 19.9% to RMB371.5 million from RMB463.8 million due to a decline in patient volume as a result of the COVID-19 pandemic.
Tier 2 Operating and Other Assets: revenue decreased by 15.6% to RMB302.9 million from RMB358.8 million due to a decrease in patient volume as a result of the COVID-19 pandemic. Adjusted EBITDA (before IFRS 16 adoption) improved to RMB0.3 million from RMB(0.2) million due to the ongoing implementation of cost-savings initiatives.
Expansion asset revenue increased by 29.3% to RMB361.5 million from RMB279.6 million due to the continued ramp-up of expansion assets. Adjusted EBITDA (before IFRS 16 adoption) improved by 47.2% yoy to RMB(85.2) million from RMB(161.4) million as a result of the strong revenue growth of the new hospitals in Guangzhou and Pudong, Shanghai.
Outpatient visits decreased by 17.3% yoy to 522,969 from 632,664 and increased by 1.2% qoq.
Inpatient admissions decreased by 19.5% yoy to 8,699 from 10,805 and increased by 7.4% qoq.
Bed utilization rate* decreased to 33.3% yoy from 38.3% due to lower inpatient admissions during the COVID-19 pandemic.
ASP: outpatient ASP increased by 11.0% yoy and inpatient ASP increased by 15.0% yoy as a result of an increase in the number of higher acuity services provided at our facilities, as less urgent services were postponed due to the pandemic.

* Bed utilization is calculated based on the weighted average maximum bed capacity of the year.

Mr. Antony Leung, Chairman of NFH said, “2020 was challenging for both us and others around the world. We quickly implemented a comprehensive and active response to combat difficulties related to the pandemic in an effort to protect our employees and our patients. Thanks to the tremendous strength and determination of our entire team, we managed to navigate the pandemic in a swift, smooth manner. As the volumes for our outpatient visits and inpatient admissions continued to grow quarter-over-quarter in the fourth quarter of 2020, we were able to achieve some revenue recovery as well as improved profitability. In addition, as the number of people seeking higher acuity services increased, both inpatient and outpatient ASP increased by double digits.”

Ms. Roberta Lipson, Chief Executive Officer of NFH and founder of UFH, commented, “As daily life in China has mostly returned to normal, travel restrictions continue to ease, and international borders open on a controlled basis, we believe this bodes well for our ongoing recovery trends. To reach a younger target audience, we delivered a live talk show on TMall, one of China’s largest e-commerce platforms during the 11.11 festival. In the two-hour live broadcast, more than two million viewers tuned in from across the country. We are also proud of several major developments in the recent months. During the fourth quarter, we completed most of the construction on our new Women’s and Children’s Hospital (DTU) in the northwest corner of Beijing, which began soft opening in late March 2021. The hospital will be the first Level III accredited specialty hospital in the UFH network with a capacity of more than 200 beds. To offer our patients access to a wider variety of medical specialty talent, we have also signed an agreement for close cooperation between our Qingdao United Family Hospital (“QDU”) and doctors at Shandong University Qilu Hospital (QILU). In addition, in December, Shanghai United Family Hospital (“PXU”) launched its Health Management Center, which offers a full range of preventative checks with individualized follow-up health management services. Looking ahead, we remain encouraged by our expansion initiatives and will continue to execute our operational and strategic plans.”

Fourth Quarter and Fiscal Year 2020 Results

For management purposes, the Company is organized into business units based on the category and stage of development of the Company’s healthcare facilities and geographic locations. There are three reportable operating segments, as follows:

(a) Tier 1 Operating Assets: the existing general healthcare facilities located in tier 1 cities in China, such as Beijing United Family Hospital (“BJU”), Shanghai United Family Hospital (“PXU”), and their associated clinics.

(b) Tier 2 Operating and Other Assets: the existing general healthcare facilities located in tier 2 cities in China, such as Tianjin United Family Hospital (“TJU”), Qingdao United Family Hospital (“QDU”), and other assets, such as a Beijing United Family Rehabilitation Hospital (“Rehab”) and other clinic assets.

(c) Expansion Assets: the facilities recently opened or about to open, including Shanghai Xincheng United Family Hospital (“PDU”), Guangzhou United Family Hospital (“GZU”), and Beijing Jingbei Women and Children’s United Family Hospital (“DTU”).

Revenue (RMB mm)
	4Q19	4Q20	Y-o-y Change %		Q-o-q Change %		Fiscal Year 2019	Fiscal Year 2020	Y-o-y Change %
Tier 1 Operating Assets⁽¹⁾	462.2	465.7	0.8	%	4.4	%	1,810.7	1,596.1	(11.9	%)
Tier 2 Operating and Other Assets ⁽²⁾	95.9	82.2	(14.3	%)	3.2	%	358.8	302.9	(15.6	%)
Operating Assets⁽³⁾	558.1	547.9	*(1.8*	%)	*4.2*	%	2169.6	1,899.1	(12.5	%)
Expansion Assets⁽⁴⁾	81.6	106.2	30.0	%	5.4	%	279.6	361.5	29.3	%
Total	639.7	654.0	*2.2*	%	*4.4*	%	2,449.2	2,260.5	(7.7	%)

Tier 1 Operating Assets: For the fourth quarter of 2020, revenue from UFH’s tier 1 facilities and their associated clinics increased by 0.8% yoy due to steady growth in various specialties, such as family medicine, internal medicine, surgery, and orthopedics; however, Tier 1 Operating Assets were also impacted by lower obstetrics revenue due to lower birth rates in 2020 and lower revenue from pediatrics yoy. Both BJU and PXU, as well as their associated clinics, achieved revenue growth qoq as a result of growth in various specialties, as previously noted. For fiscal 2020, revenue from UFH’s tier 1 facilities and their associated clinics decreased by 11.9% yoy due to an overall decline in patient volume for the year as a result of COVID-19.
Tier 2 Operating and Other Assets: For the fourth quarter of 2020, revenue from UFH’s tier 2 facilities and other assets, as a group, decreased by 14.3% yoy and increased by 3.2% qoq due to the decrease in patient volume and demand for obstetrics and pediatric procedures as compared to the prior year, as well as the gradual recovery of patient volume and increase in demand for non-emergency medical services as compared to the prior quarter. For fiscal 2020, revenue from UFH’s tier 2 facilities and other assets, as a group, decreased by 15.6% yoy due to a decline in patient volume as a result of COVID-19 and a decrease in demand for pediatric and obstetric services as compared to the prior year.
Total Operating Assets: For the fourth quarter of 2020 and fiscal 2020, revenue from UFH’s operating assets, as a group, decreased by 1.8% and 12.5% yoy, respectively, due to the overall decrease in patient volume and decreased demand for certain non-emergency services as a result of the COVID-19 pandemic. For the fourth quarter of 2020, revenue from UFH’s operating assets, as a group, increased by 4.2% qoq due to the recovery of patient volume and an increase in demand for such non-emergency medical services at the end of the year.
Expansion Assets: As a result of increased brand recognition and new patient uptick at UFH’s GZU and PDU facilities, revenue for UFH’s expansion assets, as a group, increased to RMB106.2 million in the fourth quarter of 2020 from RMB81.6 million in the fourth quarter of 2019 and RMB361.5 million in fiscal 2020 from RMB279.6 million in fiscal 2019. In the fourth quarter of 2020, GZU recorded revenue growth of 35.4% yoy and PDU 24.6% yoy. In addition, since opening in the fourth quarter of 2018, both GZU and PDU have developed higher acuity services, such as surgery and orthopedics, which contributed significantly to revenue growth in the fourth quarter of 2020 and a qoq increase of 5.4%.

Adjusted EBITDA (before IFRS 16 adoption) (RMB mm)

4Q19

4Q20

Y-o-Y Change
%

Q-o-q
Change %

Fiscal Year
2019

Fiscal Year
2020

Y-o-y
Change %

Adjusted EBITDA (before IFRS 16 adoption)

Tier 1 Operating Assets⁽¹⁾

107.6

124.0

15.3

(1.6

463.8

371.5

(19.9

Tier 2 Operating and Other Assets⁽²⁾

0.6

4.3

662.7

9.9

(0.2

)

0.3

216.8

Operating Assets⁽³⁾

108.1

128.3

18.7

(1.3

463.5

371.8

(19.8

Expansion Assets⁽⁴⁾

(37.0

)

(10.2

)

72.5

21.1

(161.4

)

(85.2

)

47.2

Unallocated Cost

(45.4

)

(27.6

)

39.0

(1.9

(158.5

)

(119.9

)

24.4

Total Adjusted EBITDA (before IFRS 16 adoption)⁽⁵⁾

25.7

90.5

252.1

0.6

143.6

166.7

16.1

Tier 1 Operating Assets: BJU, PXU, and their associated clinics achieved Adjusted EBITDA (before IFRS 16 adoption) of RMB124.0 million in the fourth quarter of 2020, an increase of 15.3% yoy due to revenue recovery and cost control. Adjusted EBITDA (before IFRS 16 adoption) of tier 1 facilities and their associated clinics decreased by 19.9% yoy due to a decline in patient volume as a result of COVID-19.
Tier 2 Operating and Other Assets: TJU, Rehab, and QDU achieved Adjusted EBITDA (before IFRS 16 adoption) of RMB4.3 million in the fourth quarter of 2020, compared to RMB0.6 million in the fourth quarter of 2019, primarily attributable to the implementation of cost control measures.
Total Operating Assets: UFH’s operating assets, as a group, achieved Adjusted EBITDA (before IFRS 16 adoption) increase of 18.7% yoy to RMB128.3 million in the fourth quarter of 2020, a decrease of 1.3% qoq, primarily due to strong revenue recovery and implementation of cost control measures.
Expansion Assets: Expansion assets, as a group, experienced an increase in Adjusted EBITDA (before IFRS 16 adoption) to RMB(10.2) million in the fourth quarter of 2020, an improvement from RMB(37.0) million in the fourth quarter of 2019, due to strong revenue growth. Adjusted EBITDA (before IFRS 16 adoption) for GZU reached breakeven for eight consecutive months, beginning in May 2020.
Total Adjusted EBITDA (before IFRS 16 adoption) for the fourth quarter of 2020 was RMB90.5 million compared to RMB25.7 million in the prior year period, primarily due to revenue recovery, strong ramp-up of expansion assets, and implementation of cost control measures. Adjusted EBITDA (before IFRS 16 adoption) of UFH’s tier 1 facilities and their associated clinics decreased by 19.9% yoy due to a decline in revenue as a result of COVID-19.

Key Operating Metrics

	4Q2019		4Q2020		*Y-o-Y Change %*				*Q-o-q Change %*
	Outpatient Volume	Inpatient Admission	Outpatient Volume	Inpatient Admission	Outpatient Volume		Inpatient Admission		Outpatient Volume		Inpatient Admission
Tier 1 Operating Assets	120,131	1,850	109,605	1,409	(8.8	%)	(23.8	%)	0.0	%	9.0	%
Tier 2 Operating and Other Assets	23,038	616	21,343	489	(7.4	%)	(20.6	%)	0.5	%	14.3	%
Operating Assets⁽¹⁾	143,169	2,466	130,948	1,898	*(8.5*	%)	*(23.0*	%)	*0.1*	%	*10.3*	%
Expansion Assets⁽²⁾	20,267	446	23,884	476	17.8	%	6.7	%	8.2	%	(2.7	%)
Total UFH	163,436	2,912	154,832	2,374	*(5.3*	%)	*(18.5*	%)	*1.2*	%	*7.4*	%

2019

2020

Y-o-Y Growth %

Outpatient
Volume

Inpatient
Admission

Outpatient
Volume

Inpatient
Admission

Outpatient
Volume

Inpatient
Admission

Tier 1 Operating Assets⁽¹⁾

473,471

6,924

372,355

5,150

(21.4

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