Legally, the European Medical Center is a foreign company United Medical Group CY Plc, registered in Cyprus, in Limassol. 15 July 2021 European Medical Center became another foreign public company, held the initial placement of securities — global depositary receipts, or GDR, — to Mosbirge.
About company
The European Medical Center is one of the largest network of private clinics and medical consultation centers in Russia. Among Russian private medical organizations in terms of revenue, the EMC is in third place after the Medsi and Mother and Child networks. This is despite the fact, that in terms of the number of regions of presence and the number of clinics, the indicators are much more modest.
The largest chains of private clinics in Russia
| Number of medical centers | Regions of presence | Revenue for 2019, billion rubles | |
|---|---|---|---|
| Medsey | 36 | 9 | 22,3 |
| "Mother and Child" | 42 | 19 | 16,2 |
| EMC | 8 | 2 | 14,85 |
| "CM-Clinic" | 22 | 4 | 9,7 |
| MedInvestGroup | 78 | 28 | 7,7 |
| JSC "Medicina" | 1 | 1 | 5 |
| Scandinavia (Ava-Peter) | 20 | 4 | 4,9 |
| MedSwiss | 7 | 3 | 4,4 |
| "Be healthy" | 9 | 6 | 4,3 |
History of the group of companies. The European Medical Center was established with the participation of the French company Europ Assistance to provide medical care to foreigners in Moscow. Reception was initially conducted by foreign specialists in several rooms. For a long time the center did not expand and showed only losses. In 1994, a loss-making company was bought by a French citizen of Russian origin Andre Kobuloff.
Expansion and opening of new clinics began only in 2001, when a large multidisciplinary clinic was opened in Moscow, in Spiridonevsky lane, with outpatient and inpatient departments and a consulting and diagnostic center.
In 2003, the European Dental Center was opened. In 2004, surgical areas were expanded, which significantly increased the number of surgical operations, a private emergency medical service was also organized. In 2006 year 100% shares of the European Medical Center were acquired by OJSC Pharmacy Chain 36.6, and in 2008, the EMC was bought out by entrepreneur Igor Shilov and his business partners.
With the advent of Shilov, the pace of business expansion accelerated. In 2009, there was another increase in production capacity: a new clinic was opened in Orlovsky lane with an outpatient, stationary, intensive care units, operating units and a consulting and diagnostic center. One of the departments of the clinic was the European Clinic for Sports Traumatology and Orthopedics, which is still the largest private orthopedic clinic in Russia.
In 2010, specialized oncology and hematology clinics were opened - the first private clinics in Russia in this area. Further, the oncological direction continued to develop, and in 2012, an oncological hospital was opened on Shchepkina Street.
In the same year, the first private clinical laboratory of pathomorphology and cytology in Russia was opened.. Investor Dehus Dolmen Nominees Limited with trusts Baring Vostok Private Equity Fund IV and Baring Vostok Fund IV Supplemental Fund was attracted, L.P., through which investments began to flow.
Investor acquired 27,8% EMC shares. Further, a children's clinic was opened on Trifonovskaya street, Family Medical Center in Solntsevo, Center for radionuclide diagnostics in the hospital on Shchepkina street, maternity hospital on Pravdy street, Medical Rehabilitation Center in Zhukovka, two international cancer centers in Moscow and Kolomna, part of the shares of the Senior Group nursing home network was purchased with the subsequent opening of a geriatric center in Malakhovka within this group of companies, a concession agreement was signed for the Moscow International Cancer Center.
In the new decade, the trend towards expansion, observed in the tenth, continued: a group of companies took a long-term lease of the MONIKI clinic.
The management company of the group of companies was established in Cyprus in 2008 under the name of United Medical Group CY Limited. In May 2021, it was renamed United Medical Group CY Plc and became a public company.
Shareholders. Initial placement of GDRs, naturally, affected the shares of the company's shareholders. Shareholders remained the same, but their shares, naturally, decreased in favor of free float, which, as a result of the listing, amounted to about 44% Shares. Igor Shilov remained the main shareholder through INS Holdings Limited, - its share decreased from 71.2 to 55,1%.
More or less significant shares were also retained by Roman Abramovich's Greenleas International Holdings and Yegor Kulkov's Hiolot Holdings Limited, and also MediaInvestGroup by Viktor Kharitonin.
Composition of the group of companies. The group of companies "European Medical Center" includes 14 companies, of which four specialize in medical services, including sports traumatology and orthopedics, Optics, aesthetic medicine, three for social services like care for the elderly, one is in medical education. The rest of the managing or auxiliary.
The composition of the group of companies "European Medical Center" (United Medical Group CY Plc)
| Activity | Country | Equity share | |
|---|---|---|---|
| European Medical Center | Medical services | Russia | 100% |
| European Clinic for Sports Traumatology and Orthopedics | Medical services | Russia | 100% |
| Amalco LLC | Intra-corporate services | Russia | 100% |
| LLC "Aesthetic Clinic EMC" | Medical services | Russia | 100% |
| Bertouana Limited | Management | British Virgin Islands | 100% |
| LLC "MC-Shchepkina 35" | Ownership and management of real estate | Russia | 100% |
| EMC School of Medicine | Educational services | Russia | 100% |
| LLC "MOK" | Medical services | Russia | 100% |
| Haleria Investments Limited | Management | Cyprus | 99,95% |
| SG-HOLD CO LIMITED | Management | Cyprus | 50,15% |
| LLC "Senior Group Malakhovka" | Social services | Russia | 50,15% |
| LLC "Social service" Assistant "" | Social services | Russia | 50,15% |
| LLC "Senior Group" | Social services | Russia | 50,15% |
| EMS-KHOLDKO LLC | Subholding company | Russia | 1% |
Geography of activity. Since the group of companies specializes exclusively in premium medical services, quite logical, that Moscow and the Moscow region were chosen as the regions of economic activity.
In these regions, the largest number of people in Russia with great financial opportunities. For this reason, the company refused to complete the construction of the positron emission tomography center in Novosibirsk, transferring it to the MedInvestGroup company.
Key figures. The main key figure of the EMC is Andrey Yanovsky, General Director, although most often the company is associated with the main shareholder Igor Shilov. Neither Yanovsky, neither Shilov has a medical education, higher education they have completely different profiles.
But this did not prevent Shilov from leading the company out of stagnation and unprofitability., and Yanovsky, who previously worked under Shilov at the Nidan company and joined the EMC in 2008, - significantly expand the company's business. Despite the lack of specialized education, Yanovsky - Ombudsman for the protection of the rights of entrepreneurs in the field of medicine.
What he earns
Services Provided. In addition to general therapeutic practice, the company provides almost the entire range of services, that exist in the medical market of Moscow and the region.
Revenue structure. The largest percentage of revenue is outpatient care, second place is inpatient treatment. Related services lead by revenue growth.
Revenue structure of the group of companies "European Medical Center", thousand euros
| 1п2020 | 1п2021 | Segment share in 1H2020 | The share of the segment in 1p2021 | Growth | |
|---|---|---|---|---|---|
| Renting premises | 164 | 802 | 0,14% | 0,59% | 389,02% |
| Other | 28 | 103 | 0,02% | 0,08% | 267,86% |
| Outpatient care | 60 095 | 76 770 | 51,42% | 56,82% | 27,75% |
| home care | 265 | 315 | 0,23% | 0,23% | 18,87% |
| Hospital treatment | 46 396 | 51 850 | 39,70% | 38,38% | 11,76% |
| Sales of pharmaceuticals | 231 | 215 | 0,20% | 0,16% | −6,93% |
| Elderly care | 6358 | 4254 | 5,44% | 3,15% | −33,09% |
| Construction | 3242 | 800 | 2,77% | 0,59% | −75,32% |
| Total | 116 879 | 135 109 | 100,00% | 100,00% | 15,60% |
Financial indicators. Basic financial ratios, other than return on equity, increased in 2020.
Net profit grows with stable revenue, which is reflected in the growth of the net profit margin. The overall picture can be assessed as positive, quite suitable for, to conduct an initial public offering.
The negative value of net working capital reflects a significant increase in loans and credits for new projects - this is rather positive, than a negative factor.
Significant fluctuations in prices for some materials and preparations, which the group of companies purchases abroad, could not significantly affect the overall cost, since the increase in prices for some purchased items was leveled in 2020 by a decrease in prices for others.
Financial ratios of the European Medical Center group of companies in 2019 and 2020
| 2019 | 2020 | The change | |
|---|---|---|---|
| Return on assets | 21,16% | 28,35% | 33,98% |
| Net profit margin | 24,27% | 31,10% | 28,14% |
| Asset turnover ratio, once | 0,76 | 0,82 | 7,89% |
| Return on equity | 81,87% | 73,59% | −10,11% |
Capital flow and liquidity of the European Medical Center group of companies in 2019 and 2020
| 2019 | 2020 | |
|---|---|---|
| Net working capital | 7 480 764 € | −7 858 791 € |
| Current liquidity ratio | 4,89 | 0,5 |
| Quick ratio | 4,96 | 0,5 |
Plans
Market conditions. The main plan is to further increase premium medical services. The focus is not on regional expansion, and to maintain a leading position in the market in terms of the quality of medical care, primarily in the field of oncology. This is facilitated by the general market conditions., which develops in favor of private clinics due to the reduction in the provision of medical services by public clinics.
Dynamics of the number of hospitals and beds in 2015-2019
| 2015 | 2016 | 2017 | 2018 | 2019 | The change | |
|---|---|---|---|---|---|---|
| Non-state hospitals, things | 245 | 347 | 371 | 417 | 431 | 75,90% |
| Beds in non-government hospitals, thousand pieces | 125 | 123 | 128 | 128 | 144 | 15,20% |
| Beds in the Moscow region, thousand pieces | 139 | 136 | 132 | 131 | 145 | 4,30% |
| The entire bed fund, thousand pieces | 1222 | 1197 | 1183 | 1173 | 1174 | −3,90% |
| Total hospitals | 5433 | 5357 | 5293 | 5257 | 5130 | −5,60% |
| Beds in public hospitals, thousand pieces | 1097 | 1074 | 1055 | 1045 | 1030 | −6,10% |
| Beds in non-state hospitals in the Moscow region, thousand pieces | 125 | 122 | 119 | 117 | 116 | −7,20% |
| Public hospitals, things | 5188 | 5010 | 4922 | 4840 | 4699 | −9,40% |
| Public hospitals in the Moscow region, things | 305 | 310 | 301 | 292 | 270 | −11,50% |
| Hospitals in the Moscow region, things | 351 | 336 | 337 | 329 | 304 | −13,40% |
Russia surpasses more developed countries in the number of doctors and hospital beds per 1,000 people. Obviously, this is the result of the healthcare system inherited from the USSR.
But there is a tendency to optimize it: the decline in the number of public clinics and beds and the increase in the number of private clinics indicate the growth of the business in the field of medicine and its investment attractiveness. At the same time, the public health system, especially after the introduction of compulsory medical insurance, works, According to the doctors themselves, ineffectively.
One of the reasons for this, seemingly, is low health care costs, insufficient to support such a quantitatively developed health care system. In this parameter, Russia is inferior even to many other developing economies., not to mention advanced.
The inefficiency of public medicine can increase the demand for private services, and this is, undoubtedly, will entail the growth of the company's securities. Relative freedom from competition in the premium segment of medical services makes it possible to believe, that plans to expand the group of companies are quite feasible in the near future.
Projects. Recently, the EMC group of companies has focused its efforts mainly on the initial placement of securities on the Moscow Exchange, which was successful. But there are also some specific business expansion projects..
First of all, this is the modernization of the MONIKI clinic, one of the oldest in Moscow. This intention was announced in the IPO memorandum. Modernization will be carried out for the treatment of cancer, its cost is 1 billion rubles. MONIKI is located on Shchepkina street, close to EMC hospital, so we can assume, that the project will turn out to be so high-profile for the EMC, that he will continue to expand in this hospital complex.
Oncology is one of the priority tasks as the EMC, and Russian medicine in general. In Russia, the incidence of cancer is higher, than most other developing countries, while the percentage of surgical treatment is one and a half times higher, how, for example, in the UK, and the number of radiotherapy units is at the level of Brazil.
Given this data, it can be assumed, that in the future there will be a high demand for such services. Therefore, the signing of an agreement with the government of the Moscow Region planned before the end of 2021 - although MONIKI is physically located in Moscow, the clinic is considered a regional medical institution - it will be positive news for the growth of the securities of the group of companies.
The remaining plans relate only to the expansion and modernization of existing production facilities., as well as the continued development of vaccines against the coronavirus SARS-CoV-2.
From specifics, except for the project of the oncological center in MONIKI, there are perhaps more or less clear plans for the development of the project of the geriatric center approved back in 2020 in Moscow on Seligerskaya Street. The poverty of plans is the weakness of the company.
Risks
The risks of a group of companies can be divided into several categories.
The risk of a decrease in the volume of the target segment of service consumers. Amid the crisis, caused by the pandemic, this is the main risk for the group of companies. Group services are much more expensive, than competitors. The reduction in the share of small and medium-sized businesses in connection with the coronavirus crisis may change the income structure of the population: many wealthy people have lost their income altogether.
The risk of provocative hype in the media. You never can tell, who benefits from spreading false rumors about the EMC, but there is practice.
In particular, Moment of Truth posted on its website information about, that at the EMC clinic, a patient with coronavirus was placed in a ward along with healthy patients. The clinic denied this information. Most likely, this was done as part of Andrey Karaulov's campaign against Deputy Prime Minister Tatyana Golikova, which Karaulov and a number of other journalists associate with the EMC business.
Against the backdrop of “coronaphobia”, such publications can seriously harm the flow of patients to EMC clinics. EMC ties with the authorities are exaggerated, allegedly allowing him to demolish the GKB. These are not the only publications of this kind and, apparently, not the last. This risk is very serious., although slightly inferior to the first.
Risk of medical errors. If medical errors in ordinary clinics, sometimes even with serious consequences, repeated regularly, then for the clinic, focused on the premium segment, any such mistake could seriously damage the reputation. EMC has such episodes infrequently., but they happen.
For example, there were situations, when the clinic discovered cancer too late; identified non-existent COVID-19 and hepatitis C; infected the patient with hepatitis C. Doctors, involved in such mistakes., usually, fired at EMC, but compensation to victims is not always paid.
conclusions
Growth of the GDR European Medical Center, more precisely its management company, looks reasonable in the light of the financial and operational performance of the group of companies. Paid medicine in Russia has good prospects for development, especially considering, that the state supports free medicine is weak.
The group of companies has recently successfully expanded, the organization of an oncological clinic on the basis of MONIKI indicates the readiness to continue the development of the medical business in the field of oncology as one of the most urgent areas of medicine in Russia.
However, there are also weaknesses. First of all, this is the lack of plans for the long term.. In addition to the oncological clinic at MONIKI, nothing is planned. Therefore, EMC securities are more likely for medium-term investors, than for long-term, who are counting on, to invest in low-risk securities and then for a couple of years, what happens to the issuer.
Medium-term investors need to focus on the news, the nearest of which is the approval of the project of an oncological clinic in MONIKI. After that, you can expect the growth of GDR, and for low-liquid Central Banks, it can be very significant on the news.
Among the risks, one can especially highlight a decrease in solvency and a decrease in the target segment of the population.. Nobody knows, how long will the coronavirus pandemic and the resulting business crisis last. That's why, certainly, tracking the dynamics of the issuer's GDRs, you also need to pay attention to business statistics and the solvency of the population.
