Aesthetic Medical International Reports First Half of 2023 Unaudited Financial Results

2023-09-05

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SHENZHEN, China, Sept. 05, 2023 (GLOBE NEWSWIRE) -- Aesthetic Medical International Holdings Group Limited (Nasdaq: AIH) (the “Company” or “AIH”), a leading provider of aesthetic medical services in China, announced its unaudited financial results for the six months ended June 30, 2023. Mr. ZHANG Chen, the Chairman of the Company, commented, “On August 16, 2023, I was honored to be elected as the Chairman of AIH. This was a significant date for us as it marked the successful closure of a series of equity transactions that were initiated on July 20, 2022. As Chairman, I am committed to working closely with our team to ensure that we continue to execute our new strategic initiatives and deliver value to our stakeholders. I am excited to lead AIH during this transformative period and am confident that we will achieve success together. In the first half of 2023, we observed the results of our informatization and digitization efforts. With information technology as our foundation and refined management as our ultimate goal, we have taken the first step towards data accuracy across various departments, which enabled real-time observation and analysis of data from each module in the actual operation of the Company. Our informational and digital transformation initiative aims to identify and address issues in real-time by analyzing data, improving efficiency, and making data-driven decisions.” Mr. ZHANG Chen continued, “Moving forward, we plan to build upon our informational and digital infrastructure and continue to strengthen our customer relationship management department. By improving the accuracy and segmentation of our data analysis, we can better understand our customers' needs and preferences, and tailor our products and services to meet those needs. We also plan to prioritize talent training, both internally and externally, by implementing a comprehensive training system that emphasizes skill development and career advancement. In addition, we are committed to the standardization of energy-based treatments as the core of our future brand expansion. Our expansion efforts will be centered around a consumer-oriented business plan that emphasizes our commitment to customer satisfaction. Finally, we understand the importance of remaining grounded and building a strong foundation as we navigate the current economic recovery. With these efforts, I am confident that AIH can establish itself as an outstanding enterprise in the future.” First Half 2023 Financial Highlights • Total revenue was RMB319.3 million (USD44.0 million), a decrease of 5.7% from RMB338.6 million in the first half of 2022. • Gross profit was RMB151.8 million (USD20.9 million), a decrease of 19.6% from RMB188.7 million in the first half of 2022. • Selling, general and administrative ("SG&A") expenses together were RMB159.8 million (USD22.0 million), a decrease of 9.9% from RMB177.3 million in the first half of 2022, and SG&A expenses as a percentage of revenue decreased from 52.4% to 50.0%. • EBITDA1 was RMB22.4 million (USD3.1 million), compared with RMB44.8 million in the first half of 2022. • Adjusted EBITDA1 was RMB26.7 million (USD3.7 million), decreased from RMB58.0 million in the first half of 2022. 1 EBITDA and adjusted EBITDA are not prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board, or IFRS. For more information regarding non-IFRS financials, please refer to “Non-IFRS Financial Measures” and “Reconciliations of IFRS and Non-IFRS Results” appearing elsewhere in this press release. First Half 2023 Operational Highlights New and repeat customers For the Six Months Ended June 30, 2022 2023 Number % of Total Number % of Total % Change New Customers 22,284 20.1 % 32,685 31.4 % 46.7 % Repeat Customers 88,791 79.9 % 71,488 68.6 % -19.5 % Total Active Customers 111,075 100.0 % 104,173 100.0 % -6.2 % • As a result of the divestment of treatment centers and the temporary closing of treatment centers in January 2023, the Company recorded a decrease of 6.2% year-on-year in the total active customers. Number of aesthetic medical treatment cases For the Six Months Ended June 30, 2022 2023 Number % of Total Number % of Total % Change Energy-based Treatments 207,581 71.9 % 177,603 69.3 % -14.4 % Minimally Invasive Aesthetic Treatments 51,728 17.9 % 43,414 16.9 % -16.1 % Surgical Treatments 16,174 5.6 % 22,054 8.6 % 36.4 % General healthcare services and other aesthetic medical services 13,034 4.5 % 13,378 5.2 % 2.6 % Total number of treatment cases 288,517 100.0 % 256,449 100.0 % -11.1 % • As a result of the divestment of treatment centers and the temporary closing of treatment centers in January 2023, the Company recorded a decrease in the number of treatment cases of 11.1% year-on-year. • Total number of non-surgical aesthetic medical treatments as a percentage of the total number of aesthetic treatments decreased by 3.6 percentage points. Average spending per customer • Average spending per customer increased by 6.0% from RMB1,174 in the first half of 2022 to RMB1,245 in the first half of 2023, primarily driven by the strategic decision to remove most of the low-price treatment promotions from our service offerings. First Half 2023 Unaudited Financial Results For the Six Months Ended June 30, (RMB millions, except per share data and percentages) 2022 2023 % Change Revenue 338.6 319.3 -5.7 % Non-surgical aesthetic medical services 237.1 229.9 -3.0 % Minimally invasive aesthetic treatments 103.8 114.2 10.0 % Energy-based treatments 133.3 115.7 -13.2 % Surgical aesthetic medical services 73.6 57.8 -21.5 % General healthcare services and other aesthetic medical services 27.9 31.6 13.3 % Gross profit 188.7 151.8 -19.6 % Gross margin 55.7 % 47.5 % -8.2 p.p.2 (Loss) for the period (3.7 ) (11.4 ) N.M. 4 (Loss) margin (1.1 )% (3.6 )% N.M. 4 EBITDA3 44.8 22.4 -50.1 % Adjusted EBITDA3 58.0 26.7 -54.0 % Adjusted EBITDA margin 17.1 % 8.4 % -8.7 p.p.2 Adjusted profit/(loss)3 9.5 (7.0 ) N.M. 4 Adjusted profit/(loss) margin 2.8 % (2.2 )% N.M. 4 Basic (loss) per share (0.07 ) (0.08 ) -14.3 % Diluted (loss) per share (0.07 ) (0.08 ) -14.3 % Notes: 2 p.p. represents percentage points 3 Refer to below “Non-IFRS Financial Measures” 4N.M. represents not meaningful Revenue Total revenue was RMB319.3 million (USD44.0 million), representing a decrease of 5.7% from RMB338.6 million in the first half of 2022, primarily attributable to the divestment of underperforming assets in 2022 as well as the temporary closing of treatment centers in January 2023. Cost of sales and services rendered Cost of sales and services rendered was RMB167.5 million (USD23.1 million), representing an increase of 11.7% from RMB149.9 million in the first half of 2022. Gross profit Gross profit was RMB151.8 million (USD20.9 million), representing a decrease of 19.6% from RMB188.7 million in the first half of 2022. Gross profit margin was 47.5%, a decrease of 8.2 percentage points from 55.7% in the first half of 2022. The decrease was attributable to the temporary closing of treatment centers in January 2023. Selling expenses Selling expenses were RMB105.1 million (USD14.5 million), representing 32.9% of the Company’s total revenue in the first half of 2023, compared with RMB111.7 million in the first half of 2022, which represented 33.0% of the Company’s total revenue of the first half of 2022. Selling expenses as of revenue decreased by 0.1 percentage points year-on-year. The reduction in the selling expenses and its contribution was mainly a result of the Company's strategic reduction of online advertising budgets, as well as the divestment of underperforming assets in 2022. General and administrative expenses General and administrative expenses were RMB54.7 million (USD7.5 million), representing a decrease of 16.6% from RMB65.6 million in the first half of 2022, primarily due to the divestment of underperforming assets in 2022 and optimization of the organizational structure and management capacity. Other gains/(losses), net Other gains/(losses), net was a loss of RMB3.9 million (USD0.5 million), compared with a profit of RMB1.0 million in the first half of 2022, primarily due to the disposal of one of our subsidiaries. Loss for the period As a result of the foregoing, the Company recorded a loss of RMB11.4 million (USD1.6 million) for the first half of 2023, compared with a loss of RMB3.7 million in the first half of 2022. Basic and diluted loss per share were both loss of RMB 0.08 (loss of USD0.01 per share) in the first half of 2023, compared with basic and diluted loss per share of RMB0.07 in the first half of 2022. Certain Non-IFRS items5 EBITDA for the first half of 2023 was RMB22.4 million (USD3.1 million), compared with RMB44.8 million in the first half of 2022. Adjusted EBITDA for the first half of 2023 was RMB26.7 million (USD3.7 million), compared with RMB58.0 million in the first half of 2022. Adjusted profit/(loss) after tax for the first half of 2023 was a loss of RMB7.0 million (USD1.0 million), compared with RMB9.5 million in the first half of 2022. 5 EBITDA, adjusted EBITDA, and adjusted profit/(loss) are not prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board, or IFRS. For more information regarding non-IFRS financials, please refer to “Non-IFRS Financial Measures” and “Reconciliations of IFRS and Non-IFRS Results” appearing elsewhere in this press release. Cash and cash equivalents Cash and cash equivalents amounted to RMB87.9 million (USD12.1 million) as of June 30, 2023, compared with RMB26.2 million as of June 30, 2022. The increase in cash and cash equivalents was primarily attributable to the private placement offerings to Hawyu (HK) Limited and MY Universe (HK) Limited. Liquidity and capital resources The Company had a net current asset of a loss of RMB297.5 million (USD41.0 million) as of June 30, 2023, which included current borrowings of RMB111.9 million. Recent Developments Renovation of Shenzhen Pengcheng Hospital and Safe Beauty Initiative Ceremony The renovation of Shenzhen Pengcheng Hospital's facade, lobby, and energy-based department was completed in July 2023. On the 28th of the same month, the “2023 Aesthetic Medical Industry Safe Beauty Initiative Ceremony” was successfully held. Ms. Hu Qing, Chief Operating Officer of the Company, delivered a speech at the ceremony. She stated that Shenzhen Pengcheng Hospital, as the founding hospital of AIH, has always been at the forefront of the industry and has demonstrative significance in the industry. It is believed that Shenzhen Pengcheng Hospital will continue to prioritize “Safe Beauty” and will constantly improve and innovate to create a new industry service model. The hospital aims to provide more convenient, high-end, and high-quality aesthetic experiences. Ms. Hu emphasized that the Shenzhen Pengcheng Aesthetic Medical Beauty brand upgrade is part of AIH's upgrading, marking an important step towards the modernization of the aesthetic medical industry. Significant Efforts Made in Medical Safety Control During the first half of 2023, the Company has made significant efforts in terms of medical safety control. Firstly, AIH has released the first issue of its medical management newsletter, which includes regulations for the practice behavior of institutions and physicians, strengthening the ability to deal with medical emergencies, and improving the management of prophylactic antimicrobial drugs used in surgery. Additionally, AIH has strengthened the safety management of anesthesia for general anesthesia surgery and standardized the content of medical documents. Secondly, AIH has developed operational capacity assessment standards for surgical, minimally invasive, and energy-based treatments for the recruitment of new physicians. Finally, AIH has established a monthly medical institution operation reporting system to better understand the operations of each medical institution under the Company in a timely manner. Successful Closing of Share Transfer, Conversion of Convertible Note and Issue of Warrants Reference is made to the press release of the Company filed with the Securities and Exchange Commission (the “SEC”) on July 20, 2022 and form 6-K of the Company filed with the SEC on February 16, 2023 and August 17, 2023 (collectively, “Previous Disclosure”) in relation to, among other, entry into a share purchase agreement, a subscription agreement, a shareholders’ agreement and a cooperation agreement. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Previous Disclosure. On August 16, 2023, the Company has closed its previously announced (i) Share Transfer of an aggregate of 21,321,962 ordinary shares of the Company from Seefar, Jubilee, and Pengai Hospital Management Corporation to Wanda; (ii) issue of a total number of 12,088,808 ordinary shares of the Company to ADV at a conversion price of US dollars equivalent of RMB4.203 per ordinary share; and (iii) issue and allotment of 4,655,386 and 6,423,983 warrants to Seefar and Wanda respectively, which can be converted into one ordinary share per warrant upon exercise. Exchange Rate This press release contains translations of certain Renminbi (RMB) amounts into U.S. dollars (USD) solely for the convenience of the reader. Unless otherwise specified, all translations of Renminbi amounts into U.S. dollar amounts in this press release are made at RMB7.2513 to USD1.0, which was the U.S. dollars middle rate announced by the Board of Governors of the Federal Reserve System of the United States on June 30, 2023. Non-IFRS Financial Measures EBITDA represents profit before income tax, adjusted to exclude finance costs and amortization and depreciation. Adjusted EBITDA represents EBITDA, adjusted to exclude professional fee, share-based payment, loss on disposal of subsidiaries. Adjusted profit/(loss) represents profit/(loss) for the period, adjusted to exclude professional fee, share-based payment, loss on disposal of subsidiaries. EBITDA, adjusted EBITDA and adjusted profit/(loss) are non-IFRS financial measures. You should not consider EBITDA, adjusted EBITDA and adjusted profit/(loss) as a substitute for or superior to net income prepared in accordance with IFRS. Furthermore, because non-IFRS measures are not determined in accordance with IFRS, they are susceptible to varying calculations and may not be comparable to other similarly titled measures presented by other companies. You are encouraged to review the Company’s financial information in its entirety and not rely on a single financial measure. The Company presents EBITDA, adjusted EBITDA and adjusted profit/(loss) as supplemental performance measures because it believes that such measures provide useful information to the investors in understanding and evaluating the Company’s results of operations, and facilitate operating performance comparisons from period to period and company to company. About Aesthetic Medical International Holdings Group Limited AIH, known as “Peng’ai” in China, is a leading provider of aesthetic medical services in China. AIH operates through treatment centers that are spread across major cities in mainland China, with a major focus on the Guangdong-Hong Kong-Macau Greater Bay area and the Yangtze River Delta area. Leveraging over 20 years of clinical experience, AIH provides one-stop aesthetic service offerings, including surgical aesthetic treatments, non-surgical aesthetic treatments, general medical services, and other aesthetic services. For more information regarding the Company, please visit . Cautionary Statements This press release contains “forward-looking statements.” These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will”, “expects”, “anticipates”, “aims”, “future”, “intends”, “plans”, “believes”, “estimates”, “likely to” and similar statements. Statements that are not historical facts, including statements about the Company’s beliefs, plans and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. These risks and uncertainties and others that relate to the Company’s business and financial condition are detailed from time to time in the Company’s SEC filings, and could cause the actual results to differ materially from those contained in any forward-looking statement. These forward-looking statements are made only as of the date indicated, and the Company undertakes no obligation to update or revise the information contained in any forward-looking statements, except as required under applicable law. Investor Relations Contacts For investor and media inquiries, please contact: Aesthetic Medical International Holdings Group Limited Email: ir@pengai.com.cn Website: AESTHETIC MEDICAL INTERNATIONAL HOLDINGS GROUP LIMITED CONSOLIDATED BALANCE SHEETS 30 June 30 June 30 June 2022 2023 2023 RMB’000 RMB’000 USD’000 ASSETS Non-current assets Property, plant and equipment 361,887 303,848 41,903 Investment properties - 23,065 3,181 Intangible assets 38,878 36,500 5,034 Investments accounted for using the equity method 5,764 - - Prepayments and deposits 18,737 11,434 1,577 Deferred income tax assets 44,299 69,482 9,581 469,565 444,329 61,276 Current assets Inventories 28,809 23,710 3,270 Trade receivables 6,075 7,379 1,018 Other receivables, deposits and prepayments 35,194 33,121 4,568 Amounts due from related parties 3,537 2,873 395 Restricted cash - 2,049 283 Asset held-for-sale - 1,083 149 Cash and cash equivalents 26,228 87,877 12,119 99,843 158,092 21,802 Total assets 569,408 602,421 83,078 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 469 873 120 Treasury shares (2023 ) (2023 ) (279 ) Accumulated losses (1,064,524 ) (1,150,846 ) (158,709 ) Other reserves 914,864 1,197,885 165,196 (151,214 ) 45,889 6,328 Non-controlling interests (29,479 ) (14,025 ) (1,934 ) Total equity (180,693 ) 31,864 4,394 AESTHETIC MEDICAL INTERNATIONAL HOLDINGS GROUP LIMITED CONSOLIDATED BALANCE SHEETS (CONTINUED) 30 June 30 June 30 June 2022 2023 2023 RMB’000 RMB’000 USD’000 LIABILITIES Non-current liabilities Borrowings 72,950 29,545 4,074 Lease liabilities 112,980 85,450 11,784 Convertible note 38,059 - - 223,989 114,995 15,858 Current liabilities Trade payables 44,438 36,414 5,022 Accruals, other payables and provisions 75,936 36,857 5,084 Contingent consideration and consideration payable 6,850 3,592 495 Amounts due to related parties 473 - - Contract liabilities 193,209 165,390 22,808 Borrowings 167,232 111,937 15,437 Lease liabilities 29,175 27,391 3,777 Current income tax liabilities 8,799 9,416 1,299 Convertible note - 64,565 8,904 526,112 455,562 62,826 Total liabilities 750,101 570,557 78,684 Total equity and liabilities 569,408 602,421 83,078 AESTHETIC MEDICAL INTERNATIONAL HOLDINGS GROUP LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 30 June 30 June 30 June 2022 2023 2023 RMB’000 RMB’000 USD’000 Revenue 338,594 319,303 44,034 Cost of sales and services rendered (149,898 ) (167,547 ) (23,106 ) Gross profit 188,696 151,756 20,928 Selling expenses (111,692 ) (105,113 ) (14,496 ) General and administrative expenses (65,643 ) (54,668 ) (7,539 ) Finance income 78 78 11 Finance costs (17,003 ) (9,650 ) (1,331 ) Other gains/(losses), net 998 (3,878 ) (535 ) (Loss) before income tax (4,566 ) (21,475 ) (2,962 ) Income tax credit 820 10,124 1,397 (Loss) for the period (3,746 ) (11,351 ) (1,565 ) Total comprehensive (loss)/income for the period (3,746 ) (11,351 ) (1,565 ) (Loss)/profit attributable to: Owners of the Company (4,621 ) (10,078 ) (1,390 ) Non-controlling interests 875 (1,273 ) (175 ) (Loss)/profit for the period (3,746 ) (11,351 ) (1,565 ) AESTHETIC MEDICAL INTERNATIONAL HOLDINGS GROUP LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 30 June 30 June 30 June 2022 2023 2023 RMB’000 RMB’000 USD’000 (Loss)/earnings per share for (loss)/profit attributable to owners of the Company (in RMB per share) —Basic (0.07 ) (0.08 ) (0.01 ) —Diluted (0.07 ) (0.08 ) (0.01 ) Total comprehensive (loss)/income attributable to: Owners of the Company (4,621 ) (10,078 ) (1,390 ) Non-controlling interests 875 (1,273 ) (175 ) Total comprehensive (loss)/income for the year (3,746 ) (11,351 ) (1,565 ) EBITDA 44,834 22,361 3,084 Adjusted EBITDA 58,033 26,728 3,686 Adjusted profit/(loss) 9,453 (6,984 ) (963 ) AESTHETIC MEDICAL INTERNATIONAL HOLDINGS GROUP LIMITED RECONCILIATIONS OF IFRS AND NON-IFRS RESULTS EBITDA and Adjusted EBITDA For the Six Months Ended June 30, 2022 2023 2023 RMB’000 RMB’000 USD’000 (Loss)/profit before income tax for the period (4,566 ) (21,475 ) (2,962 ) Adjustments + Finance costs 17,003 9,650 1,331 + Amortization and depreciation 32,397 34,186 4,715 EBITDA 44,834 22,361 3,084 + Professional fees 2,736 1,476 203 + Share-based compensation expense 10,463 + Loss on disposal of subsidiaries 2,891 399 Adjusted EBITDA 58,033 26,728 3,686 AESTHETIC MEDICAL INTERNATIONAL HOLDINGS GROUP LIMITED RECONCILIATIONS OF IFRS AND NON-IFRS RESULTS (CONTINUED) Adjusted Profit/(Loss) For the Six Months Ended June 30, 2022 2023 2023 RMB’000 RMB’000 USD’000 (Loss)/profit for the period (3,746 ) (11,351 ) (1,565 ) Adjustments + Professional fees 2,736 1,476 203 + Share-based compensation expense 10,463 + Loss on disposal of subsidiaries 2,891 399 Adjusted profit/(loss) 9,453 (6,984 ) (963 )