UPDATE 1-Russia's MD Medical Group H1 earnings fall 66 pct
* Posts net profit of 250 mln roubles vs 728 mln a year ago
* Hike in payroll, other expansion related costs weigh
MOSCOW, Sept 9 (Reuters) - Russian private healthcare company MD Medical Group said first-half net profit fell 66 percent due to a hike in costs related to its expansion.
Russia's private healthcare sector, boosted by a growing middle class and private medical insurance, is emerging as a competitor to the ailing system of public hospitals and clinics that often fail to meet demand for quality services.
MDMG, which specialises in women's healthcare, was the first Russian company in the sector to float, raising more than $300 million in the London share sale in October last year to expand its clinics chain.
It earned 250 million roubles ($7.50 million) in January-June, down from 728 million roubles in the same period of 2012, the company said in a statement.
More deliveries in its new Lapino hospital outside Moscow and acquisitions of clinics helped drive revenue up 31 percent to 2.6 billion roubles, but the total cost of sales and administrative expenses rose 63 percent and 173 percent, respectively.
The costs rose because of an increase in payroll and materials and supplies expenses due to a ramp-up of the Lapino hospital and acquisition of two clinic chains in Samara and Irkutsk.
The company manages a total of 16 healthcare facilities, including two hospitals and 14 outpatient clinics, and has begun construction of a third hospital, in Ufa.
Its shares trade at $14, up from their issue price of $12.