In the past, we’ve questioned whether NMC Health’s (NMC) rapid growth – revenue at a 34 per cent CAGR through 2014-18 – has come at the expense of operational performance. This may have been a little churlish given that two key metrics – gross margin and receivables as a proportion of revenue – both improved in 2018.
Net debt is the real issue. Acquisitions totalling $553m (£435m) were completed last year, pushing up net debt/payables by 44 per cent. Year-end net debt stood at 3.1 times cash profits. The alarm bells won’t be sounding just yet, NMC is the largest private healthcare provider in the UAE, so it’s operating in a highly profitable sector, but one synonymous with excessive leverage.
One way to mitigate financial and execution risk is through the formation of joint ventures. NMC, alongside the General Organization for Social Insurance (GOSI) and its investment arm Hassana Investment Company, have closed definitive agreements in relation to a joint venture – NMC KSA – in Saudi Arabia.
Leaving aside risk management, the venture is looking to tap into the demographic trends which are driving private sector participation in healthcare from 25 per cent to 35 per cent, as scoped in King Salman’s National Transformation Plan.
