Q1 2023 Aesthetic Medical International Holdings Group Ltd Earnings Call

Participants

Derrick Shi; IR, Associate Director; Aesthetic Medical International Holdings Group Limited

Toby Wu; CFO; Aesthetic Medical International Holdings Group Limited

Presentation

Operator

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Aesthetic Medical International first quarter 2023 earnings conference call. During today's presentation, all parties will be in a listen-only mode. As a reminder, today's conference call is being recorded. On the call today from Aesthetic Medical International are Mr. Toby Wu, Chief Financial Officer; Mr. Derrick Shi, Investor Relations' Associate Director. Mr. Derrick Shi Investor Relations will review our business operations and company highlights followed by Mr. Toby Wu who will introduce the company's financial performance. They all be available to answer your questions during the Q&A session that follows.
Before we get started, I want to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance. These include statements about our future expectations, financial projections and our plans and prospects. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make during the call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law.
Our discussion today will include non-IFRS financial measures, including EBITDA, adjusted loss and adjusted EBITDA. You should not consider EBITDA, adjusted EBITDA, adjusted loss as a substitute or superior to net income performance or net income prepared in accordance with IFRS. Furthermore, because non-IFRS measures are not prepared 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. At this time, I'd like to turn the call over to Mr. Derrick Shi, Investor Relations, Associate Director of Aesthetic Medical International. Mr. Derrick Shi, please go ahead.

Derrick Shi

Thank you, operator, and everyone for joining the call today. We are excited to share our first quarter 2023 earnings and operational highlights with our stakeholders. In the first month, a majority of our treatment centers were temporarily closed due to the widespread infection of COVID-19, resulting in a total revenue of RMB148.9 million, representing a decrease of 7.3% from RMB160.7 million in the first quarter of 2022. However, we were able to recover and achieve a net profit of RMB182,000 rebounded from a loss of RMB2.5 million in the first quarter of 2022. As of the date of this report, we successfully divested two underperforming treatment centers. This was part of our ongoing strategy to optimize our portfolio and ensure sustainable growth. As a result of our divestment efforts, SG&A, which means selling, general and administration expense as a percentage of revenue, decreased by 7.4 percentage points compared to the previous year. This is a positive indication that our strategy is working and that we are on track to achieving our goals.
In April 2023, Shenzhen Guangdong-Hong Hospital initiated the renovation of its department of energy base equipment and the exterior [package target]. This redevelopment is aimed at providing a more than and refresh look to the beauty. Their innovation project was launched after the successful renovation of Shenzhen Pengai, another flagship hospital, and it is expected to be completed by June.
In May 2023, the share purchase agreement is closed, in July 2022 is expected to be closed. This agreement was entered into by and among the company, Australia Wanda International Company Limited, Seefar Global Holdings Limited, Jubilee Set Investments Limited, Dr. Zhou Pengwu and Ms. Ding Wenting.
Upon the closing of the agreement, Peak Asia Investment Holdings Limited has undertaken to convert its convertible note outstanding principal of months of USD5 million, as well as interest into the company's ordinary shares at a price of RMB4.203 per share, which will further strengthen our financial position. To protect our customers and employees from the second wave of COVID-19 and influenza A, we strengthened our medical management personnel, implemented new safety protocols and adapted to the new working conditions to ensure that our customers continue to receive safe and stable services. As the economy begins to recover, we believe that the cost consumers, we will be more willing to invest in self-care and personal appearances as their financial situations improve.
With this in mind, we are optimistic about the future of the Aesthetic Medical Industry and our performances in 2023. Thank you again for all your support and attention. And I would like now to turn the call to our CFO, Toby Wu to introduce the financials and operations for the first quarter of 2023. Toby, please go ahead.

Toby Wu

Thank you, Derrick, and hello, everyone. I will summarize some of the key unaudited financial results and operations result for the first quarter of 2023 and at March 31. In the first quarter of 2023, total revenue decreased by 7.3% year on year to RMP148.9 million, primarily attributable to the divestment of underperforming assets in 2022 as well as the temporary closing of our treatment center in January 2023.
Gross profit was the RMB72.6 million, representing a decrease of 18.4% year on year, gross profit margin decreased 6.6 percentage points to 48.8%. The decrease was attributable to the temporary cause of shipments center in January 2023.
Selling expenses were RMB42.4 million, representing 28.5% of the company's total revenue in the first quarter of 2023. Selling expenses as of revenue decreased by 4.4 percentage points on year on year. But the reduction in selling expenses and its contribution was mainly a result of the company's strategic reduction on the online advertising budget as well as the divestment of underperforming assets in the 2022.
General and admin expenses was RMB24.7 million, representing a decrease of 21.6%. And the general and admin expenses as of revenue decreased by 3 percentage points year on year, primarily due to the divestment of a underperforming asset in 2022. As a result of [ongoing], the company recorded profit of RMB0.2 million for the first quarter of 2023. [Rebound] from a loss of RMB2.6 million in the first quarter of 2022. Basic and diluted loss per share were both earning RMB0.004 in the first quarter of 2023 compared with the basic and diluted loss per share of RMB0.05 in the first quarter of 2022.
EBITDA for the first quarter of 2023 was a profit of RMB19.9 million compared with the RMB20 million in the first quarter of 2022. Adjusted EBITDA for the quarter of 2023 was RMB23.7 million compared with RMB26.9 million in the first quarter of 2022.
Adjusted profit after tax for the first quarter of our 2003 was RMB4 million compared with the RMB4.3 million in the first quarter of 2022. In terms of our operating performance, as a result of divestment of shipments and company recorded a decrease of 8.7% year on year in the total active customers. Total non-surgical Aesthetic Medical shipment as a percentage of the total number of our Aesthetic shipments decreased by 8.4 percentage points.
Average spending per customer increased by 1.4% from RMB2,967 in the first half of 2022 to RNB3,009 in the first half of 2003, primary derived by the strategic decision to remove most of the lower price segments promotions from our service offering.
Looking ahead, we will continue to implement [abos] mentioned strategy. We are dedicated to providing [at a] and quality service to our customer and [diverting] substantiable long-term growth.
This concludes our preparation remarks. Thank you for joining us on today's call. We are now open to the call -- to questions. Operator, please go ahead.

Question and Answer Session

Operator

Yes, thank you. (Operator Instructions).
All right. As there are no questions right now, I would like to return the floor to Mr. Derrick Shi for any closing comments.

Derrick Shi

Okay. Thank you, operator. On behalf of our entire management team, I would like to thank everyone again for joining us today. If you have any questions, please contact us through e-mail at ir@pengai.com.cn. We appreciate your interest and support in Aesthetic Medical International and look forward to speaking with you again next time. Operator, please go ahead.

Operator

Thank you, everyone, again for attending Aesthetic Medical International's first quarter of 2023 earnings conference call. This concludes the call today, and we thank you for listening in. Goodbye.