Catering to wealthy patients, Russia's EMC says ripe for IPO

MOSCOW (Reuters) - Russian private health clinic operator European Medical Centre (EMC) is preparing for a possible initial public offering to tap investor demand for recession-proof healthcare stocks, its chief executive told Reuters.

A board with the logo of Russian private health clinic operator European Medical Centre (EMC) is on display on the roof of a building in Moscow, Russia May 31, 2018. REUTERS/Tatyana Makeyeva

Financial market sources said in January that EMC, founded in 1989 to provide medical care for foreigners living in Moscow, was considering an IPO this year.

“I think we’ve matured, we look good and strong ... and we can proceed (to an IPO) when (the shareholders) tell us,” CEO Andrey Yanovsky said in an interview.

EMC, owned by businessman Igor Shilov and private equity fund Baring Vostok, is looking at London and Moscow for a possible share float, Yanovsky said.

Share offerings by Russian companies have all but come to a standstill since 2014 when a sharp drop in oil prices and Western sanctions plunged the economy into recession. A handful of deals has been done as the economy began to recover, but any new plans are uncertain because of existing sanctions and the prospect of new ones.

Yanovsky shrugged off the impact of economic woes on EMC, saying its focus on affluent customers with foreign exchange deposits let it escape the recent crisis unscathed.

“We are watching carefully what’s going on on the market and I think that our segment is immune to this kind of turmoil,” he said.

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EMC has six medical centers in and around Moscow which provide services from cancer treatment to dental care and cosmetology for high-income clients.

The company’s in-patient facilities serve meals from upmarket Moscow restaurant Pushkin and all of its prices are pegged to the euro benchmarks at clinics in Europe and Israel.

Yanovsky said EMC was also winning business by tempting wealthy Russians - who spend $700 million a year on medical treatment overseas - to be treated in Russia instead.

“Four years ago I had two contracts with the so-called assistance companies which help (people) travel (to get medical care). Now I have 52 contracts because they send patients to me.”

EMC has averaged annual sales growth of 19 percent over the past three years, Yanovsky said. In 2017, its turnover was 163 million euros and it earned 57.4 million euros before interest, taxes, depreciation and amortization (EBITDA).

The company aims to maintain its EBITDA margin at 35 percent and plans to adopt a dividend policy envisaging payouts of at least 35 percent of net profit starting next year, Yanovsky said.

He added the payout ratio would likely be “far more than that” in the next couple of years as EMC only planned to spend 2 million-4 million euros on maintenance a year, having invested over 300 million euros in the past decade.

EMC would be the second Russian company from the sector to float, after women's health specialist MDMG MDMGq.L listed in London in 2012.

The sector has benefited from a zero income tax rate and a developing private insurance system.

Private clinics also provide treatment under state-funded insurance programs and Yanovsky said that business accounted for 8 percent of EMC’s sales last year and was rising.

Reporting by Maria Kiselyova and Olga Popova; Editing by Susan Fenton