Modern Dental Group Increases 2024 Interim Dividend 33% YoY, Accelerating Growth on Digital Cases with a 2-Year CAGR of 56%

HIGHLIGHTS OF THE RESULTS:

● Revenue for the six months ended June 30, 2024 (“the period“) was approximately HK$1,701.8 million, representing an increase of approximately 6.3% compared to the same period last year. Notably, the large European market accounted for 48.4% of the Group’s total, with sales growth of 16.2% compared to the same period last year.

● Gross profit margin for the period was approximately 53.7%, with gross profit of approximately HK$914.0 million. This represents an increase of approximately 5.4% compared to the same period last year.

● The Group‘Adjusted EBITDA for the period was approximately HK$388.6 million, representing an increase of approximately 5.1% compared to the same period last year.

● The Group’s core business profit for the period was approximately HK$225.5 million, representing a growth rate of 7.2% compared to the same period last year.

● The Group‘Net profit for the period was approximately HK$214.4 million, representing an increase of approximately 1.9% compared to the same period last year.

● With respect to the Group‘Considering the EBITDA and net profit for the period, it should be noted that the figures reflect: (i) one-off costs related to potential acquisitions of approximately HK$2.8 million; and (ii) one-off costs related to the relocation of manufacturing facilities in Shenzhen and Vietnam of approximately HK$10.2 million.

● Basic earnings per share for the six months ended June 30, 2024 were HK$22.59 cents.

● The Board of Directors has declared an interim dividend of HK$8.0 cents per ordinary share for the six months ended June 30, 2024.

● During the reporting period the Group has‘The digital solution cases (both overseas and domestic) produced from the production facilities in mainland China increased to approximately 602,485 cases, representing an increase of 61.1% compared with the same period in 2023 due to the efforts of our customers‘ continued adoption of intraoral scanners.

(August 29, 2024, Hong Kong) – Modern Dental Group Limited (hereinafter referred to as “Modern Dental Group” or “the Group”, stock code: 03600.HK”), a leading global supplier of dental prosthetics, is pleased to announce its unaudited interim results for the six months ended June 30, 2024 (“the Period”).

During the six months ended June 30, 2024, although the macroeconomic environment remains challenging, the Group’s multi-dimensional strategies and comprehensive product portfolio, including higher-end and cost-effective dental treatments, enabled the Group to capitalize on market opportunities by acquiring new customers and increasing sales volume, demonstrating the Group’s ability to outperform its competitors throughout the economic cycle. The consolidation trend of the dental prosthesis industry clearly continues and with the addition of our Vietnam production facility and Dongguan Phase 2 production facility, the Group has further improved its market position.

The Group’s continued revenue growth represents solid execution in each of the Group’s markets, operationally and financially, and illustrates the Group’s ability to deliver strong financial results in a relatively stable operating environment characterised by consistent order volume growth, industry competitiveness and close relationships with its clients and customers. The Group’s underlying fundamentals remain solid and we are well positioned to capture further opportunities in the future.

European business community

During the period under review, the European market recorded revenues of approximately HK$822.9 million, representing an increase of approximately HK$112.9 million compared to the six months ended 30 June 2023. This geographic market accounted for approximately 48.4% of the Group’s total revenues. The increase in revenues from the European market was attributable to increased sales order volume, driven by the launch of new products, such as digital prostheses, and our state-of-the-art digital workflows.

The Group is a leader in providing comprehensive digital solutions ranging from numerous minimally invasive and aesthetic prosthetic solutions to intra-oral scanners and clear aligners and is well positioned to seize the opportunities arising from the accelerated digitalization trend of the dental industry. The Group continues to aggressively gain market share from international and domestic competitors through our well-established dental ecosystem solutions with a focus on education and digitalization, available in close proximity to our customers; effectively meeting the high expectations of our customers through our various onshore and offshore resources.

North American business world

During the period under review, the North American market recorded a turnover of approximately HK$385.3 million. This geographic market accounted for approximately 22.6% of the Group’s total turnover.

Our customers’ interest around digital dentistry continued to grow during the period. A significant portion of our business in the North America region consists of high-quality products that are manufactured domestically. With our centralized digital workflows and network oversight of our broad coverage of manufacturing units within the region, we are well positioned to support customers’ needs throughout their digitalization journey, focusing on leveraging efficiencies and providing an enhanced customer experience across the network. Looking ahead, the Group aims to utilize the manufacturing facility in Vietnam to establish a new business unit specialized in serving medium/large dental clinic chains in the North American market.

Greater China Business

During the period under review, the Greater China market recorded revenues of approximately HK$335.8 million. This geographic market accounted for approximately 19.7% of the Group’s total revenues. As a result of the increase in sales volume in the mainland China market following the full implementation of the volume-based purchasing policy in the mainland China market gradually since the second half of 2023, our mainland China business reported revenue growth of 9.5% in the period compared to the same period last year, but this is offset by the depreciation of RMB against HK$ by 2.7%. However, this also led to aggressive promotions for dental implant treatments by mainland Chinese dental clinics in Hong Kong (which experienced a notable decline in patient visits in Hong Kong).

The Group is optimistic about the medium/long term prospects for this market, particularly where the latest government procurement measures are expected to (i) standardise the prices of dental prostheses and develop price transparency, creating a level playing field; (ii) ensure that the Group’s leading brand name and reputation become a key consideration for its clients and customers; and (iii) the Group will benefit from its large manufacturing team and its ability to allocate resources efficiently on a customer or client basis.

Australian business community

During the period under review, the Australian market recorded revenues of approximately HK$127.9 million, representing an increase of approximately HK$3.6 million compared to the six months ended 30 June 2023. This geographic market accounted for approximately 7.5% of the Group’s total revenues. The increase in revenues from the Australian market was mainly due to the increase in sales volume resulting from the increase in market share, driven by the digitalization trend in the dental industry, partially offset by the depreciation of AUD to HK$ of 2.8% compared to the six months ended 30 June 2023.

Through our various brands, offering products produced both on land and at sea, at a range of price points from economy and standard to premium/boutique, the Group can effectively access the entire Australian market.

Future prospects

The Group is expected to continue to consolidate the dental prosthetics market and the Board believes that the consolidation trend is irreversible and clearly continuing. Therefore, the Board is confident that, despite any short- to medium-term challenges that the global economy may face, the Group is expected to outperform its competitors. In a year in which some of the Group’s competitors faced material adverse issues, the Group continued to thrive and it is the Group’s ability to thrive in such uncertain economic conditions that provides the Board with comfort in its optimistic view of the Group.

Going forward, the Group aims to strengthen its global leadership position through opportunistic transactions, including strategic collaborations, acquisitions, joint ventures and/or partnerships, to further expand and complement our product offering (particularly our clear aligner products), distribution and sales networks, which in turn will fuel our business expansion. The Group continues to grow into more than just a one-stop-shop supplier of dental prosthetics, but a complete dental ecosystem to support our customers. The Group’s investment in Dongguan Phase 2 and manufacturing facilities in Vietnam is expected to provide the Group with greater manufacturing solutions and options, which in turn will increase the Group’s level of research and development to further improve our production and products.

Looking ahead to 2024, thanks to the extensive experience of the Board of Directors and its determination to address any short-term challenges, the Group is ideally placed to take full advantage of business opportunities and will remain opportunistic in these opportunities, while remaining prudent and cautious to protect the interests of shareholders.

About Modern Dental Group

Modern Dental Group Limited (Stock code: 03600.HK) is a leading global supplier, distributor and consultant of dental prosthetics, focused on providing custom-made prosthetics to customers in the growing prosthetics industry. Our product portfolio is broadly divided into three product lines: fixed prosthetics, such as crowns and bridges; removable prosthetics, such as removable dentures; and non-removable prosthetics, such as orthodontic appliances, sports protectors, clear aligners and anti-snoring appliances.

Modern Dental Group has a global portfolio of respected brands including Labocast, Permadental and Elysee Dental in Western Europe, YZJ Dental in China, Modern Dental Lab in Hong Kong, Modern Dental USA in the United States and Southern Cross Dental in Australia. We have grown these brands by delivering premium and consistent quality products and superior customer service. We have over 80 service centers in over 23 countries, serving over 30,000 customers.