NMC Health PLC Strong performance for H1 2019 in core markets of UAE

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NMC Health PLC (LON:NMC), the leading Gulf Cooperation Council and international private healthcare operator, has today announced its results for the six months ended 30 June 2019.

Key Highlights

· Strong performance for H1 2019 in core markets of UAE and on track for broader GCC expansion.

· EBITDA of $323.5m (post IFRS 16) and $276.3m (pre-IFRS16), representing growth of 22.5% (for pre-IFRS 16) and FY guidance remains on track.

· Working capital cycle days reduced substantially, supporting one of the highest EBITDA-to-Free Cash Flow for H1 in the history of the company.

· Delivering balance sheet strength, with net debt-to-EBITDA improving.

· Continued successful execution of the Group’s strategy has remained the key to management’s ability to guide and then deliver on strong growth, year after year.

· Management reiterates the guidance provided on 28 May 2019.

Maintaining an unbroken trend of delivering on promised growth

NMC’s management has consistently guided that a verticals-based strategy is the best means of capitalizing on the healthcare markets in the UAE, as well as the wider GCC. This approach reflects the unique nature of the respective populations, which are more modest in size yet have demographic and economic characteristics that are favourable for continued demand for high quality healthcare access.

Building on the steps taken on this front in past years, NMC has continued to enhance its vertical framework. This approach, combined with strong off-take from the end market, has ensured NMC has continued to deliver a market leading performance.

Notwithstanding the volatility of asset prices, as reflected by the stock market, the healthcare market remains highly predictable. NMC’s track record of guidance and delivery now extends to six years, with management confident that 2019 will prove to be no different.

NMC served a total of c. 4.0m patients (+16.7% YoY) in H1 2019 with 1,922 (H1 2018: 1,530) operational beds. Given the sustained addition of new capacity, 31% of the operational beds are in early ramp-up phase, translating into an occupancy rate of 67.7% (down 220bps YoY).

The essence of NMC’s strategy is to create and autonomize verticals. H1 2019 saw significant progress against this strategy:

Higher complexities continue to evolve in the Multispecialty vertical, with nephrology becoming a key focus area among Centres of Excellence, following the success in paediatrics.

The Fertility business reinforced its position as a global leader by leveraging on the unmatched knowledge base available to it.

The Long-term care business introduced a new business line in the form of outpatient services through rehabilitation care.

Cross referrals to other business segments (including Distribution) from Operations & Management vertical has translated into substantially higher revenue generation than from the underlying O&M contracts alone.

For NMC, 2019 is a year focused on:

Improving utilization and efficiencies of existing assets.

Integration of acquired assets and continued centralization of services.

Completion of partnership with GOSI/Hassana Investment Company, which is viewed by management as one of the landmark events in the history on NMC.

Investment on new capacity across UAE and Oman.

Deleveraging the balance sheet, with net debt-to-EBITDA (excluding the impact of IFRS 16) standing at 2.7x in H1 2019 vs. 3.1x at the end of 2018.

Improving cash flow generation: Group working capital cycle improved to 90 days (FY 2018: 106 days) as Group receivable days improved to 89 (FY 2018: 99 days), while inventory days dropped to 56 (FY 2018: 74 days).

H1 2019 recorded one of the highest EBITDA-to-Free Cash Flow conversion for the first half of the year historically.

Outlook

Continued successful execution of the Group’s strategy has remained integral to management’s ability to sustainably guide and then deliver on strong growth, year after year. Based on the performance of the Group in H1 2019 and the continued off-take in the end market in Q3 2019, management reiterates the guidance provided on 28 May 2019.

Given the Company’s strong operational and financial performance and continued trend of performing in line with expectations, management remains highly confident in relation to future performance. Looking ahead, the Board intends to continue its successful growth strategy, which it believes will continue to create significant value for shareholders over the long-term.

Prasanth Manghat, Chief Executive Officer, commented:
NMC Health again achieved strong performance in the first six months of the year, as we continue to deliver on our growth strategy in our attractive target markets. Our ability to perform strongly in a challenging environment testament to NMC’s strategy of developing niche, differentiated verticals in our core markets that provide the best possible care for our patients.
All key financial and operational metrics of our healthcare and distribution businesses performed in line with our guidance. We also made good progress on increasing free cashflow during the period and we see room for further improvement in H2 2019, as has been the trend in previous years.
We are also particularly pleased to have closed our strategically important partnership with GOSI/Hassana Investment Company which ranks as one of the defining events in the history of NMC. This partnership will provide us with the ideal platform to establish a dominant position in the attractive Saudi Arabia healthcare market.
2019 remains focused on integration and realization of synergies from previous acquisitions. The Board remains committed to continuously improving transparency and enhancing the Group’s governance and ESG framework. The establishment of a new committee to oversee all related party activities in addition to the current robust program is a good example in this regard.
We continue to view the future with confidence and reiterate our guidance for the full year 2019.

Presentation and conference call details

· A presentation displaying the Group’s H1 2019 financial performance in graphical form will be made available at 7am UK time on 22 August 2019 on https://nmc.ae/investor-relations.

· NMC will host a conference call for the H1 2019 results at 12 noon UK on 22 August 2019. For dial-in details, please contact FTI Consulting on [email protected]. A presentation for the results call will be made available on https://nmc.ae/investor-relations at 12 noon UK time on 22 August 2019.