NMC gives strong bill of health for 2018 and 2019
Feeling in fine fettle in recent months, NMC Health provided an improved set of revenue and earning guidance for this year and next.
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The Gulf region hospital operator pepped up its revenue guidance by two percentage points to 24% in the current calendar year and said earnings before interest, tax, depreciation and amortisation would swell 36% to $480m.
For 2019, the United Arab Emirates-based group expects revenues to perk up 22-24% and EBITDA by 18-20% from a mix of organic growth as it ramps up operations at newer hospitals and clinics, integrates and expands acquisitions and opens new 'greenfield' sites.
Guidance for 2019 does not include the effects of implementation of IFRS 16 accounting standards, nor the impact of anticipated spin-off of the FTSE 100 group's Saudi hospital assets into a new joint venture until the terms are agreed, which is expected before the end of December. Analysts reckon IFRS will increase 2019 EBITDA by around $80m, offset in depreciation and interest expenses.
Ahead of a capital markets day on Monday at the London Stock Exchange, NMC management said they remain confident about the longer-term margin guidance, with EBITDA margins "on track" to hit the 25% guidance level by 2020/2021.
NMC shares, having last week hit their lowest since January, were up 9% to 3,308p by Monday afternoon.
Analysts at Berenberg said they understood the revenue growth includes circa 15% organic growth, with the upgrade largely due to the bolt-on acquisitions announced earlier in the year.
"Some analysts have already incorporated these deals and are expecting EBITDA to be in the mid-$470m range (Berenberg: $473m), while others remain at around the old guidance mark. We therefore expect estimates to increase by 2-3%."
For 2019 the market had been expecting revenue growth of 21%, with the EBITDA consensus $567m, according to FactSet.
"We are unlikely to make material changes to our above-guidance $584m estimate, but expect average expectations to increase by 1%," Berenberg said, adding that the Saudi joint venture could result in a further EBITDA increase of $50m-60m, with minority interests offsetting much of the impact on the bottom line.