Tuesday 25 June 2024

Alaa Ameen

Tibbiyah 2022 gross profit increases 7.4pc to $41m

RIYADH, April 2, 2023

Arabian International Healthcare Holding Company (Tibbiyah), a leading integrated healthcare provider in Saudi Arabia, has posted a revenue increase of 3.9% and a gross profit rise of 7.4% to SR154.2 million ($41 million) for 2022.
This shows the solid performance from the medical supplies division (Premma Health) and the resilience of the medical equipment division (FMS), despite challenges faced in the healthcare sector.
In FY22, Tibbiyah made progress in working capital management, with improvements in the Cash Conversion Cycle (CCC), demonstrating the company’s commitment to efficient operations. 
Notable recovery
Tibbiyah saw a notable recovery in revenue in the second half of 2022 compared to H1-FY22 and achieved a significant 16% improvement over H2-FY21. 
This rebound led to an H2-FY22 net income of SR46.4 million ($12.37 million), playing a key role in contributing to the overall net income for FY22. The company maintains a strong project backlog and pipeline, indicative of its adaptability and promising outlook.
Alaa Ameen, Chief Executive Officer, Tibbiyah, commented: “In a challenging year, Tibbiyah has demonstrated its resilience and ability to capitalise on opportunities within the domestic healthcare market and the secular growth trends backed by strong demographics in the kingdom. Our strategic growth initiatives and commitment to diversifying our revenue streams have set us on a strong path towards becoming the leading integrated healthcare provider in the Kingdom with a unique value proposition.” 
"With our focused efforts on working capital management and a strong project backlog and pipeline, we are confident that our investments in internal capabilities and strategic acquisitions will drive positive growth in the future. The consolidation of NewYou into the full year results, starting from September 2022, has already begun yielding positive outcomes for Tibbiyah, while our joint venture with BGI is anticipated to bear fruit in 2023, as GenaLive Medical Co. was officially registered in December 2022. Our commitment to expanding our core portfolio into novel specialised services, especially within the private sector, remains unwavering as we continue to deliver world-class integrated medical services and cutting-edge solutions across the kingdom.” 
Growth initiatives
The acquisition of Innovative Healthcare Company Holding Limited (NewYou) and formation of GenaLive Medical Company via a JV with BGI Almanahil Health for Medical Services, and an additional under progress JV with Unilabs Diagnostics AB, have collectively supported Tibbiyah’s strategic growth initiatives and diversified its portfolio. 
The company has achieved a notable increase in the Saudisation rate by 5 percentage points. This progress is further demonstrated by enhanced diversity, particularly with the inclusion of more women in the workforce, as well as improved company culture and employee retention. These achievements, alongside targeted investments in personnel, ensure Tibbiyah is well-positioned for sustained growth in the future.
Financial review
Revenues of SR642.7 million (FY21: SR618.5 million) increased driven by the sound performance of Premma, which experienced increased demand for medical supplies, and was offset by challenges faced by FMS due to headwinds in the healthcare sector, primarily caused by awarding delays from contractors and projects. 
Furthermore, the strategic diversification through the acquisition of NewYou in late 2022 contributed positively to the overall revenue, resulting in a total increase of 3.9%. 
Gross profit of SR154.2 million (FY21: SR143.5 million) representing a 7.4% increase that outpaced the growth in revenues. This was predominantly a result of the resilience of FMS, which maintained a marginally higher gross profit margin. 
Premma, in line with its solid sales performance, also experienced an improvement in its gross profit margin, while NewYou further supported the total gross profit and margin through its favourable operating model and efficiency collectively driving the overall increase in Tibbiyah’s gross profit for the year.
One-off items
FY21 included several one-off items and accounting adjustments, such as bad debt reversals, which had an outsized contribution to the net income. In FY22, Tibbiyah strategically invested in personnel to enhance the company's capabilities and drive future growth, leading to a 23.9% rise in SG&A expenses. 
Additionally, other income was lower due to a one-off contractual settlement recorded in FY 21. Higher finance charges were incurred in line with the increased interest rates, which significantly impacted finance charges in the second half of 2022, as Tibbiyah secured borrowing for the acquisition of NewYou.
Taking these factors into account, it is important to recognise that although Tibbiyah's net income excluding non-controlling interests decreased to SR25.8 million in FY22 (FY21: SR82.3 million), the company's overall performance remains robust. 
Cash and cash equivalents increased from SR11.0 million at the end of 2021 to SR83.6 million, as NewYou’s strong cash position was consolidated during H2 2022, and core business cash flow was maintained in line with 2021 levels.
Total borrowings increased to SR432.5 million (FY21: SR275.0 million), primarily due to financing the acquisition of NewYou.
Strategy and outlook
Tibbiyah remains focused on leveraging its strong executional capabilities, positioning, and continued positive momentum in the kingdom’s healthcare sector, to deliver on its strategic growth objectives. 
In line with the company’s sustained initiatives to support the healthcare sector transformation under the Vision 2030 agenda, Tibbiyah is expanding its core portfolio into new higher margin specialised services, including in the private sector. 
This is primarily aimed at balancing the cyclicality of its project-based customers. Tibbiyah seeks to continue to be a provider of world- class integrated medical services and advanced solutions to a growing base of customers across the kingdom.
Tibbiyah expects 2023 to see stronger sales volumes with a promising project backlog and pipeline, as well as contribution from JVs and acquisitions further materialising. While maintaining a positive outlook, the management remains prudent in its approach to cost management, ensuring the company’s long-term financial stability and sustainable growth.-- TradeArabia News Service


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