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NMC Health shares jump as it issues positive outlook after strong first half

Last updated: 10:30 20 Aug 2018 BST, First published: 07:46 20 Aug 2018 BST

NMC
NMC's revenue growth was driven by a strong performance in its healthcare division

NMC Health PLC (LON:NMC) shares shot up more than 6% to 4,320p after saying it has a positive outlook for the rest of the year following a jump in first-half earnings and revenues.

The company, which provides healthcare in the United Arab Emirates, posted a 32.1% increase in earnings (EBITDA) to US$225.5mln for the first six months of the year as margins grew by 220 basis points to 24.2%.

Revenues gained 20.2% to US$932.0mln, driven by a strong performance in its healthcare division, which operates hospitals around the UAE.

The healthcare division, which accounted for 73% of group revenues, saw the number of patients rise by 19.7% to 3.4mln. The distribution division, which provides wholesale trading of pharmaceuticals, medical equipment, food and cosmetics, posted an 8.4% increase in revenue to US$225mln.

NMC expands through joint ventures and acquisitions 

In June, NMC signed a joint venture with Hassana Investment Co to establish a healthcare platform in Saudi Arabia. The group said it expects the venture to “ substantially boost” its growth prospects in the Kingdom of Saudi Arabia.

READ: NMC Health notches up bumper year as acquisition spree continues

In January, it made two acquisitions worth US$207mln, including a 70% stake in UAE-based healthcare provider CosmeSurge for US$170mln and an 80% stake in Saudi Arabia’s Al Salam Medical Group for US$37mln.

NMC also completed the acquisition of Chronic Care Specialist Medical Centre (CCSMC) Saudi Arabia.

Chief executive Prasanth Manghat said he sees “continuing good growth potential across different parts of the group in 2019 and beyond and remain confident in the long-term prospects of the business as we enter the second half of 2018”.

NMC business update

In a separate business update, NMC said it has agreed to buy Aspen Healthcare, which has a network of nine facilities across the UK including four hospitals, from Tenet Healthcare for £10mln.

The firm has also signed operations and management contracts in Kenya for two hospitals in Nairobi that are expected to generate revenues of US$2mln per year. 

The company is planning to expand its IVF business, having recently entered three new markets including Sweden, Latvia and Kenya.

"We continue to expand into new geographies, with our footprint now spread across 17 countries," said Manghat.

"Despite the passage of a relatively short time period since outlining the enhanced strategy, we have made substantial progress across all facets."

Investors should wait for buying opportunities, says analyst

Ian Forrest investment research analyst at The Share Centre, said: “These are good results from NMC Health and the positive outlook has clearly been well received by the market. The shares are up 5% in early trading following a strong run already this year."

However, he said after such a rise in the share price, the valuation becomes a key issue. At more than 30x forward earnings, Forrest feels investors "could wait for better buying opportunities".

"We therefore suggest a ‘hold’ recommendation for investors looking for capital growth and willing to accept a medium to high level of risk.”

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