MD Medical Investments : Group Posts 28% Revenue Growth, 37% EBITDA Growth in 2016

• Revenue increased 28% year-on-year (y-o-y) to RUB 12,179 mln vs. RUB 9,507 mln in FY 2015, driven mainly by the continued ramp-up at Lapino, improved results at existing clinics, and the new hospital in Ufa, and the results of new Siberian clinics consolidated since Q1 2016.
• EBITDA grew 37% y-o-y to RUB 3,670 mln.Like-for-like EBITDA grew 32% y-o-y. TheEBITDA margin was 30%, up 2 p.p. y-o-y.
• Net profit grew 29% y-o-y to RUB 2,277mln.
• Operating cash flow increased 37% y-o-y to RUB 3,861 mln.
• CAPEX amounted to 2,222 mln, including M&A costs of RUB 475 mln. Key investments included the construction of a new wing at the Novosibirsk hospital (RUB 739 mln) and maintenance of existing assets (RUB 465 mln).
• Debt increased 6% vs. 30 June 2016 to RUB 3,283 mln, whilenet debt decreased 10% from 30 June 2016 to RUB 1,648 mln as cash and equivalents increased by 29% vs. 30 June 2016 to RUB 1,643 mln. The net debt to EBITDA ratio decreased to 0.4x.
• Working capital remained negative at RUB (1,376) mln and represented 11% of revenue.

* - As of 30 June 2016

• Continued ramp-up at Lapino. Capacity utilisation rates were 82% at the deliveries department, 81% at the IVF department, 61% at the in-patient department, and 43% at the out-patient department1.

• Flow of patients to Mother and Child Ufa hospital continued to grow during 2016. Average capacity utilisation was 35%2at the deliveries department, 75% at the IVF department, 41% at the in-patient department and 42% at the out-patient department.

• Ground-breaking ceremony for a new hospital in Samara. The Mother and Child Samara hospital will have a planned area of 15,000 sqm and 164 beds. The hospital will have annual capacity for up to 3,000 deliveries, 1,200 IVF cycles, 29,500 patient-days, and 397,000 out- patient visits.

• Opening of a new clinic in Moscow, Mother and Child Khodynskoe Pole, in June 2016. The clinic offers a wide range of women's healthcare services, such as IVF, consultations with geneticists and OBGYNs, as well as services in foetal medicine including foetal diagnostics and treatment. It has capacity for up to 1,000 IVF cycles and 39,600 consultations with doctors each year.

• Opening of a new clinic in Kostroma in April 2016, the first in the region to offer IVF. The new clinic also provides OBGYN consultations, pregnancy examinations, expert ultrasound

1 Recalculated capacity at Lapino hospital: in-patient days - 28,470; out-patient visits - 639,540.

2 Recalculated capacity at Lapino hospital: in-patient days - 26,280; out-patient visits - 290,800.

examinations, and ante-natal diagnostics. The new clinic will be able to cater for up to 10,000 physician visits per year.

• Opening of a new IVF department at Mother and Child Yugo-Zapad clinic in Moscow in March 2016, which can carry out 800 IFV cycles a year. The expanded Mother and Child Yugo-Zapad clinic will offer new services including hysteroscopy and fertiloscopy, as well as chorion biopsy and amniocentesis for genetic research.

• Opening of the interventional cardiology and cardiovascular surgery department at Lapino hospital. It offers emergency and routine care, and carries out high-tech endovascular diagnostics, and operative treatments.

• Opening of the new out-patient medical centre in Odintsovo with a total area of 140 sq m that offers OBGYN, ultrasound screening, urology, otolaryngology, neurology and surgery. The medical centre effectively serves as a branch of Lapino hospital and is located only 10 km from the hospital - the Group's largest medical facility. The medical centre is able to carry out up to 30,000 specialist treatments per year.

"We completed 2016 with a record performance in the history not only of our Group, but of the whole sector.

"Revenue for FY 2016 grew 28% y-o-y to RUB 12,179 mln. EBITDA improved by 37% to RUB 3,670 mln, with an EBITDA margin growth of 2 p.p. to 30%. Net profit increased 29% to RUB 2,277 mln. Net debt to EBITDA ratio declined to 0.4х.

"Throughout the past year, we continued to improve capacity utilisation at our hospitals in Lapino and Ufa, which remained the key drivers of our revenue growth. The six clinics we acquired in Siberia completed their full year of operation as part of the Group, accounting for 7% of revenue growth. These results demonstrate that implementing a balanced development strategy backed by dynamic organic growth and carefully selected acquisitions enable us to grow above the market year on year.

"On the back of this impressive growth, our market capitalisation nearly doubled over 2016. However, despite this positive trend, we believe that our shares remain undervalued and do not fully reflect our achievements. At the same time, we are confident that our efforts will be acknowledged by the market, and we aim to make every effort to grow our business to the benefit of our shareholders.

"2016 was an unconditional success for us in every direction. However, this is just the beginning. Last month we announced our ambitious development strategy, including plans to open nine hospitals and a number of clinics by 2021. In 2017, we opened a hospital in Novosibirsk and are continuing to build our next one - in Samara.

"As you can tell, we are enthused, energised, and ready to continue the successful growth of our business going forward."

Revenue grew by 28% y-o-y to RUB 12,179 mln thanks to higher patient numbers at Lapino, PMC and Ufa, as well as the Group's existing clinics. The Siberian clinics acquired in December 2015 and January 2016 also made a significant contribution to the Group's results.

In FY2016, the share of regional clinics and hospitals in overall revenue continued to grow y-o-y and amounted to 34%, mainly thanks to increased revenue from the Ufa hospital and the acquisition of the Siberian clinics.

Key areas of focus - OBGYN, deliveries, IVF and paediatrics - represent 75% of the Group's revenue. IVF was the fastest-growing service line in 2016 (up 63% y-o-y). The largest contribution to IVF growth was made by the newly acquired clinics in Siberia, as well as Lapino, PMC and Moscow clinics.

Cost of sales, including general and administrative expenses and excluding D&A, amounted to RUB 8,521 mln in FY 2016 (up 25% y-o-y).

LFL expenses increased by 16% to RUB 7,922 mln, while LFL revenue grew 20%.

The increase in expenses in 2016 was mainly due to the higher number of patient visits and cost inflation.