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Condensed Financial Statement And Dividend Announcement For The Year Ended 31 December 2023
Condensed Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income
Condensed Interim Statements of Financial Position
Review of Performance
Statement of Comprehensive Income
Revenue
As at 31 December 2023, the Group has 105 dental outlets, 5 medical outlets and 1 dental college in operations in Singapore, compared to 107 dental outlets, 5 medical outlets and 1 dental college as at 31 December 2022.
As at 31 December 2023, the Group has 44 dental outlets in Malaysia compared to 44 dental outlets in Malaysia and 1 dental outlet in PRC as at 31 December 2022.
As at 31 December 2023 and 31 December 2022, the Group has 1 dental equipment & supplies distribution company and a medical laboratory company in Singapore and 1 dental equipment & supplies distribution company in Malaysia.
The revenue contribution from dental and medical clinics increased by 8% from $82.4 million for the six months ended 31 December 2022 (“2H22”) to $88.9 million for the six months ended 31 December 2023 (“2H23”). The increase of $6.5 million was mainly due to higher revenue contribution from Singapore dental clinics, offset by lower revenue contribution from our medical clinics, disposal of the Shanghai Chuangyi in June 2023 as well as unfavourable impact of strong Singapore Dollars against Ringgit from the Group’s operation in Malaysia.
The revenue contribution from medical laboratory and dental equipment & supplies decreased by 15% from $7.9 million in 2H22 to $6.7 million in 2H23. The decrease of $1.2 million was mainly due to lower revenue contribution from the dental equipment & supplies companies in Singapore and Malaysia offset by higher revenue contribution from the Group’s medical laboratory business.
The revenue contribution from dental and medical clinics increased by 4% from $160.9 million for the 12 months ended 31 December 2022 (“FY22”) to $167.8 million for the 12 months ended 31 December 2022 (“FY23”).
Comparing FY23 with FY22, the revenue contribution from medical laboratory and dental equipment & supplies decreased by 26% or $5.4 million.
Other (Losses) Gains – Net
Other losses decreased from $5.2 million in 2H22 to $2.8 million in 2H23 mainly due to the absence of allowance for impairment on inventories in 2H23 offset by impairment of goodwill in 2H23.
Comparing FY23 with FY22, other gains decreased by $2.3 million due to the same reasons as given above.
Other Items of Expense
Consumables and Supplies Used in Dental & Medical Clinics
Consumables and supplies used increased by 9% from $7.2 million in 2H22 to $7.8 million in 2H23. The increase was mainly due to the increase in revenue in dental clinics in Singapore.
As a percentage of revenue from the dental and medical outlets, consumables and supplies used in the dental and medical outlets in 2H23 was 8.8% compared to 8.7% in 2H22.
Comparing FY23 with FY22, consumables and supplies used in dental and medical clinics increased by 4% or $0.6 million.
As a percentage of revenue from the dental and medical outlets, consumables and supplies used in the dental and medical outlets in FY23 and FY22 was the same at 8.6%.
Cost of Sales from Medical Laboratory and Dental Equipment & Supplies
The cost of sales from medical laboratory and dental equipment & supplies decreased by 44% from $5.3 million in 2H22 to $2.9 million in 2H23. The decrease was due to the decrease in revenue of the dental equipment & supplies businesses in Singapore and Malaysia.
As a percentage of revenue from medical laboratory and dental equipment & supplies, cost of sales used in medical laboratory and dental equipment & supplies in 2H23 was 44.0% compared to 66.7% in 2H22.
Comparing FY23 with FY22, cost of sales from medical laboratory and dental equipment & supplies decreased by 39% or $4.4 million due to the decrease in revenue of the dental equipment & supplies businesses in Singapore and Malaysia as well as decrease in revenue contribution from the Group’s medical laboratory business.
As a percentage of revenue from medical laboratory and dental equipment & supplies, cost of sales used in medical laboratory and dental equipment & supplies in FY23 was 46.2% compared to 55.9% in FY22.
Employee Benefits Expense
Employee benefits expense, which include professional fees paid to dentists, increased by 7% from $53.3 million in 2H22 to $56.9 million in 2H23. The increase of $3.6 million was mainly due to increase in revenue from the dental clinics in Singapore in 2H23.
As a percentage of revenue, employee benefits expense in 2H23 was 59.5% compared to 59.0% in 2H22.
Comparing FY23 with FY22, employee benefits expense increased 5% or $5.2 million due to the same reason given above.
As a percentage of revenue, employee benefits expense in FY23 was 59.6% compared to 57.2% in FY22.
Depreciation and Amortisation Expense
Depreciation and amortisation expense increased by 3% from $2.6 million in 2H22 to $2.7 million in 2H23. The increase of $0.1 million was mainly due to higher depreciation and amortisation expense from dental clinics in Singapore as well as higher amortisation expense on the development cost incurred on the development of the Group’s digital Artificial Intelligence (AI) guided clinical decision support system in 2H23.
As a percentage of revenue, depreciation and amortisation expense in 2H23 was 2.8% compared to 2.9% in 2H22.
Comparing FY23 with FY22, depreciation and amortisation expense increased by 4% or $0.2 million due to the reason given above.
As a percentage of revenue, depreciation and amortisation expense in FY23 was 2.8% compared to 2.7% in FY22.
Depreciation of Right-Of-Use (“ROU”) Assets
Depreciation of ROU assets remains the same at $6.2 million for 2H23 and 2H22.
As a percentage of revenue, depreciation of ROU assets in 2H23 was 6.5% compared to 6.9% in 2H22.
Comparing FY23 with FY22, depreciation of ROU assets increased by 4% or $0.5 million mainly due to increase in depreciation of ROU assets in Singapore and Malaysia.
As a percentage of revenue, depreciation of ROU assets in FY23 was 6.9% compared to 6.7% in FY22.
Other Expenses
Other expenses increased by 10% from $6.1 million in 2H22 to $6.7 million in 2H23. The increase of $0.6 million was mainly due to the increase in repair and maintenance expense for Singapore dental clinics, bursaries to some of the Group’s dentists to improve their skill set, marketing expenses as well as general expenses for the Group’s Singapore operation.
As a percentage of revenue, other expenses in 2H23 was 7.0% compared to 6.7% in 2H22.
Comparing FY23 with FY22, other expenses increased by 9% or $1.0 million, mainly due to the reasons given above.
As a percentage of revenue, other expenses in FY23 was 6.8% compared to 6.3% in FY22.
Finance Costs
Finance costs increased by 21% from $2.4 million in 2H22 to $2.9 million in 2H23. The increase of $0.5 million was due to higher interest expense in 2H23 as a result of higher interest rate.
As a percentage of revenue, finance costs in 2H23 was 3.0% compared to 2.6% in 2H22.
Comparing FY23 with FY22, finance costs increased by 45% or $1.7 million for the same reason above.
As a percentage of revenue, finance costs in FY23 was 3.1% compared to 2.2% in FY22.
Share of Loss from Equity-Accounted Associate
Aoxin Q & M manage to turn from a loss in 2H22 to profit in 2H23, resulting in the Group to record a share of profit from equity-accounted associate of $0.1 million in 2H23.
Comparing FY23 with FY22, share of loss decreased by 85% or $0.5 million for the same reason give above.
Profit Before Tax and Net Profit After Tax
The Group’s profit before tax increased from $2.2 million in 2H22 to $6.8 million in 2H23. After deducting provision for income tax expense of $1.5 million, the Group’s net profit increased from $1.3 million in 2H22 to $5.4 million in 2H23.
Profit after tax attributable to owners of the parent increased from $1.5 million in 2H22 to $6.2 million in 2H23.
The Group’s net profit after tax decreased from $11.9 million in FY22 to $11.1 million in FY23.
Profit after tax attributable to owners of the parent increased from $11.3 million in FY22 to $11.5 million in FY23.
Statement of Financial Position
As at 31 December 2023, the Group has cash and cash equivalents of $34.0 million while bank borrowings plus finance leases amounted to $80.3 million. As at 31 December 2022, the Group has cash and cash equivalents of $39.7 million while bank borrowings plus finance leases amounted to $85.1 million.
Current Assets
Cash and cash equivalents as at 31 December 2023 decreased to $34.0 million from $39.7 million as at 31 December 2022. The decrease of $5.7 million was mainly due to dividend payment of $9.2 million, dental equipment and renovations for existing clinics, loan repayment, sign on bonuses for dentists, lease liabilities payment, offset by net cash generated from operations of $33.5 million.
Trade and other receivables as at 31 December 2023 increased to $31.2 million from $27.0 million as at 31 December 2022. The increase of $4.2 million was mainly due to increase in trade receivables from Singapore dental clinics and profit guarantee receivables from vendors of Aoxin Q & M Dental Group Limited, an equity-accounted associate of the Company.
Other assets as at 31 December 2023 decreased to $3.6 million from $4.0 million as at 31 December 2022. The decrease of $0.4 million was mainly due to decrease in prepayment from the Group’s medical laboratory.
Inventory as at 31 December 2023 increased to $11.8 million from $11.1 million as at 31 December 2022. The increase of $0.7 million was mainly due to increase in inventory from the dental equipment & supplies company in Malaysia offset by decrease in inventory from the dental equipment & supplies company in Singapore.
Non-Current Assets
The net book value of property, plant and equipment as at 31 December 2023 increased to $37.6 million from $36.9 million as at 31 December 2022. The increase of $0.7 million was mainly due to expansion of existing clinics to install more dental chairs offset by depreciation of plant and equipment.
The net book value of ROU assets as at 31 December 2023 decreased to $46.6 million from $52.6 million as at 31 December 2022. The decrease of $6.0 million was mainly due to depreciation of the ROU assets offset by renewal of ROU assets.
Investment in associates as at 31 December 2023 decreased to $24.6 million from $25.2 million as at 31 December 2022. The decrease of $0.6 million was mainly due to translation loss due to a weaker exchange rate for RMB against SGD.
Other receivables as at 31 December 2023 increased to $2.4 million from $2.2 million as at 31 December 2022. The increase of $0.2 million was due to increase in loan to dentists of the Company offset by the repayment of loan by the dentists of the Company.
Other assets as at 31 December 2023 increased to $8.0 million from $7.5 million as at 31 December 2022. The increase of $0.5 million was mainly due to an increase in sign on bonus for dentists offset by amortisation of sign on bonuses for dentists.
Current Liabilities
Trade and other payables as at 31 December 2023 increased to $19.2 million from $19.4 million as at 31 December 2022. The increase of $0.2 million was mainly due to increase in GST payable to IRAS offset by lower accrued expenses in FY23.
Other financial liabilities as at 31 December 2023 increased to $1.1 million from $0.5 million as at 31 December 2022. The increase of $0.6 million was due to increase in bills payable from the dental equipment & supplies distribution company in Malaysia.
Non-Current Liabilities
Provisions as at 31 December 2023 increased to $1.0 million from $0.8 million as at 31 December 2022. The increase of $0.2 million was due to increase of provision for reinstatement cost for clinics in Singapore.
Lease liabilities from ROU assets as at 31 December 2023 decreased to $39.2 million from $45.2 million as at 31 December 2022. The decrease of $6.0 million was due to repayment of operating lease offset by renewal of operating leases.
Other financial liabilities as at 31 December 2023 decreased to $79.2 million from $84.6 million as at 31 December 2022. The decrease of $5.4 million was due to repayment of bank loan.
Statement of Cash Flows
The Group generated net cash flow from operating activities of $19.3 million in 2H23. This was mainly derived from the operating cash flows before changes in working capital of $20.7 million offset by a marginal increase of working capital.
Net cash used in investing activities in 2H23 amounted to $2.3 million, mainly due to purchase of plant and equipment for the existing dental clinics and cost of developing the Artificial Intelligence (AI) guided clinical decision support system.
Net cash used in financing activities in 2H23 was $16.4 million, mainly due to repayment of lease liabilities arising from right-of use assets, repayment of bank loans, dividend payment to shareholders.
Consequent to the above factors, the Group’s cash and cash equivalents was $34.0 million as at 31 December 2023.
Commentary
Industry Prospects
Barring any unforeseen circumstances, there are no known significant changes in the trends and competitive conditions of the industry in which the Group operates and no other major known factors or events that may adversely affect the Group in the next reporting period and the next 12 months.
Recent Developments
Proposed Investment by EM2AI Professionals Holdco Pte. Ltd. Into EM2AI Pte. Ltd. As an Interested Person Transaction
On 25 January 2024, the Company informed the shareholders of the Company that the Company has entered into a joint venture agreement with EM2AI Professional Holdco Pte. Ltd. (“Investor”) and its wholly owned subsidiary, EM2AI Pte Ltd., pursuant to which the Investor has agreed to invest an aggregate of $1.6 million fresh funds into EM2AI for an effective shareholding interest of 51% in EM2AI. In additional, the Investor has also agreed to provide an interest free loan of $3.7 million to EM2AI.
Update on the Use of Proceeds from Placement of Treasury Shares
The Board of Directors of the Company wishes to provide an update on the use of the proceeds of approximately $1.7 million raised from the placement of treasury shares in the capital of the Company on 20 October 2022.
As at 31 December 2023, the Company has fully utilised the proceeds raised from the placement for the following purposes:
Future Plans
The Group intends to continue executing the business plans outlined below.
Expansion of network of dental clinics in Singapore and Malaysia
The Group is initiating a strategy of intensive organic growth of dental clinics and will expand its team of dentists to support the future growth of its operations in Singapore and Malaysia. We will continue to develop, invest and optimise our digital clinical decision support system to provide the most effective and suitable treatment plans for patients.
With rising standards of living and higher expectations of dental healthcare, especially in Singapore, the Group believes its well-positioned to meet the rising demand for primary and high-valued specialist dental healthcare services for its patients.
Expansion in Southeast Asia
The Group is continuously looking for opportunities to expand its dental business to other viable Southeast Asian countries.
Medical Laboratory
The Group’s medical laboratory will continue progressively to roll out its pipeline of new PCR tests for various medical purposes. These include the tests for sepsis, identification of bacteria pathogens and their associated antimicrobial resistance in hospitalised pneumonia.