NMC Health (NMC) once again extended its head-spinning growth last year, as patient numbers increased by 30 per cent and strategic expansion was directed to Saudi Arabia, the US and Africa. Against this geographic expansion, annual revenues have kept pace, and have now more than quadrupled since the 2012 IPO. What’s more, earnings before interest, tax, depreciation and amortisation (Ebitda) outpaced the top line, suggesting profitability has not been overlooked in the hunt for scale.
So why did shares in the Gulf-based hospital group sharply sell off on the publication of full-year numbers? One answer can be found in the cash flow statement, which revealed that net cash generated from operating activities – previously used interchangeably to describe free cash flow – came in at $387.8m, or a meagre 79.6 per cent of Ebitda.
Management described this conversion rate as “healthy”, although the market is likely to have been surprised by the acquisition-fuelled surge in finance costs to $121m, after factoring in interest on a convertible bond and sukuk (sharia-compliant bond). Depreciation and amortisation charges also rose 40 and 47 per cent, respectively. A below-expectation final dividend probably only added to the sense of unease.
On average, analysts forecast earnings of $1.80 a share in 2019, up from an average estimate of $1.40 last year.
| NMC HEALTH (NMC) | ||||
| ORD PRICE: | 2,801p | MARKET VALUE: | £5.83bn | |
| TOUCH: | 2,798-2,802p | 12-MONTH HIGH: | 4,376p | LOW: 2,508p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 626¢* | NET DEBT: | 139% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
| 2014 | 0.64 | 77.5 | 41.2 | 5.4 |
| 2015 | 0.88 | 85.4 | 44.3 | 6.2 |
| 2016 | 1.22 | 152 | 71.1 | 10.6 |
| 2017 | 1.60 | 210 | 91.0 | 13.0 |
| 2018 | 2.06 | 257 | 120 | 18.1 |
| % change | +28 | +22 | +31 | +39 |
| Ex-div: | 13 Jun | |||
| Payment: | 10 Jul | |||
| £1=$1.32. *Includes intangible assets of $1.62bn, or 777¢ a share | ||||
