NMC Health plc (LSE:NMC) (‘NMC’), the leading integrated private healthcare network operator in the United Arab Emirates, announces its interim results for the six months ending 30 June 2014.
•Group Revenues increased by 15.1% year-on-year (YoY, compared to H1 2013) to $314.3m
•Group net profit increased 26.6% (from $32. 3m 1H13 to $40.9m 1H14)
•Group EBITDA was $52.0m (+12.7% YoY) resulting in a Group EBITDA margin of 16.5%
•Healthcare division patient numbers increased by 13.7% YoY, achieving a positive increase in occupancy despite the rise in the number of operational beds to 277 and delivered a moderate expansion in revenue per patient to $114
•Distribution division growth was supported by new product introductions and increased sales effort with stock keeping units (SKUs) exceeding 81,000
•Two major milestones were achieved since the end of the period, with the openings of Brightpoint Women’s Hospital and NMC Dubai Investment Park General Hospital in July, 2014
During the first half of the 2014 financial year, the Group continued to demonstrate good growth at both the Group and divisional level. Group revenues increased by 15.1% to $314.3m (H1 2013: $273.1m). Group EBITDA improved by 12.7% to $52.0m (H1 2013: $46.1m).
Revenue in the Healthcare division for the first half of 2014 increased by 12.3% to $160.9m (H1 2013: $143.3m). Healthcare division EBITDA was $45.5m for the first half of the year, which represented growth of 12.5% compared to same period last year (H1 2013: $40.5m). The EBITDA margin was 28.3% compared with 28.2% for the comparative period in 2013.
Revenue in the Distribution division grew by 12.3% to $165.2m (H1 2013: $147.1m) compared to the same period last year. Distribution division EBITDA was $16.5m (H1 2013: $14.5m), with an EBITDA margin of 10.0% (H1 2013: 9.9%).
Dr B.R. Shetty, Chief Executive Officer, commented, “I am pleased with the strong start to this year as NMC crossed the $50 m EBITDA mark for the first time by midway through the financial year and simultaneously delivered substantial growth in key performance indicators. The opening of both the Brightpoint and DIP hospitals in early July is also a major positive milestone for the company and management team. We expect these two major additions to our hospital portfolio to make significant contributions to our future growth. With our home market economy still growing strongly I view the remainder of 2014 with confidence and we look forward to the addition of new assets to our portfolio including the Al Ain Medical Centre in H2, 2014 and the Khalifa City Hospital in H1 2015.”
NMC’s Healthcare division revenues reached $160.9m during H1 2014, a strong 12.3% Year on Year (YoY) growth. Divisional EBITDA totaled $45.5m (+12.5% YoY) as healthcare margins remained in line with the same period of 2013, at 28.3% (+5bps).
The key drivers include:
•Strong outpatient (+13.7%) and inpatient (+12.1%) growth, as NMC’s strategy and market positioning continues to deliver in terms of meeting demand trends.
•Increase in occupancy to 70.1% (+650bps) despite increase in operational bed capacity to 277 (+6.1%)
•Hired 102 doctors in the past 12 months to take the total number to 542 as at 30 June 2014
•An increase in average revenue per patient to $114
We continue to emphasise our strategy and market positioning as a high quality and affordable healthcare services provider in the UAE and back this with the expansion in our teams of medical professionals and support staff coupled with general enhancements in our service platform, all within the context of an expanding UAE economy and population. As a result, the number of patient visits to NMC’s hospitals and other medical facilities has increased by 13.7% to 1.15 million in the first half of 2014. Patient growth has been particularly strong in our Dubai, Al Ain and Sharjah medical assets.
Dubai Specialty Hospital, which delivered a 13% YoY increase in patient numbers, expanded occupancy by 1110bps to 69% during the same period despite an increase in operational beds to 94 (+3 beds) out of 100 licensed. Meanwhile, patient visits increased by 5% at the much smaller Dubai General Hospital in Deira and by 94% at the more specialized BR Medical Suites in Dubai Healthcare City, where we broadened our service offering to include more general medical services. It should be noted that this growth precedes the roll-out of mandatory insurance in Dubai on a phased basis from October 2014 and the positive effects it is expected to have on demand growth, particularly within the market segments NMC is focused on. Consequently, the opening of NMC General Hospital in DIP in July 2014 brings the needed additional capacity (+55% in bed terms) to our fast growing Dubai operations.
At Al Ain Hospital, patient numbers grew by 12% YoY and operational beds increased by 22% to 73 (out of a total capacity of 100). In the Sharjah medical center, patient numbers expanded by 16%.
Meanwhile, Abu Dhabi Specialty hospital continued its positive trend and NMC was able to fine tune its service offering to sustain an even higher capacity utilisation rate, as patients increased by 9% and bed occupancy reached 77% (+50bps). In parallel, the NMC Day Surgery Centre in Mohammad bin Zayed City in Abu Dhabi, which opened in July 2013, continued to ramp up and saw patient numbers expand by a very strong 65% compared to the second half of FY 2013 as community awareness of its availability and NMC’s services increased.
During the period, we continued to achieve high client satisfaction with our operation and management services at Sheikh Khalifa General Hospital in Umm Al Quwain, which NMC manages on behalf of the UAE Ministry of Presidential Affairs. NMC has recorded management fees in respect of this contract of $2.9m during the first half of 2014.
New hospitals in Abu Dhabi and Dubai
Regulatory approval has been obtained in relation to our Brightpoint Women’s Hospital (Abu Dhabi) and DIP General Hospital (Dubai). As a result, both facilities commenced operations in early July 2014.
Brightpoint Women’s Hospital has a licensed capacity of 100 beds and will start initial inpatient operations with 60 beds. DIP General Hospital holds a 60 bed licensed capacity with operations commencing with 30, with the remainder being made available in line with demand. Both Abu Dhabi and Dubai have proven to be highly rewarding markets for NMC with rapidly expanding demand, leaving the balance for future market introduction based on demand.
The Brightpoint Women’s Hospital is the first private sector women’s hospital in Abu Dhabi and brings increased specialisation to the market and our Group offering. The opening of the DIP General Hospital in Dubai is also a timely addition to our portfolio in a strategic location within the emirate (in close proximity to the Dubai World Central, Jebel Ali Port and Dubai Expo area) ahead of the full roll out of mandatory healthcare insurance. The sharp rise in capacity utilisation over the past year within our Dubai assets, ahead of the impact from the introduction of mandatory insurance, has further increased the Group’s need for this additional facility to cope with upcoming growth potential.
Total capital expenditure on the development and initial equipment for these facilities amounted to $131.4m as at 30 June 2014.
Healthcare Facilities under Development
Khalifa City Hospital
Construction on our new Khalifa City Hospital (250 beds), which will be our largest facility when fully open, is also progressing on schedule. The building shell and core are almost fully completed and work on the interior has commenced. We continue to expect the opening of this hospital in H1 2015.
Khalifa City is a growing suburb of Abu Dhabi and along with other neighbouring suburbs of Mussafah, Baniyas and Shahama, is anticipated to house around 20% of the population of Abu Dhabi by 2030.
We currently expect the hospital to open with an initial 75 beds in H1 2015, with the remaining capacity becoming operational on a phased basis. Total capital expenditure for the entire development and equipment within the facility will be up to US$200m and this will be phased until full capacity for the facility is reached.
Al Ain Medical Centre
Work is progressing well at Al Ain Medical Centre and we continue to expect to open the facility in H2, 2014. The Al Ain Medical Centre will expand NMC’s reach within the region, increase referrals to our specialty hospital in the city and boost our medium to long-term growth prospects.
The total capital expenditure for the new facility is expected to be up to $7m which will be financed from existing resources.
The management team continues to look at a number of areas for further business expansion in the Healthcare sector in the UAE, including reviews of new sites for potential owned and managed facilities which the Group considers will add to its existing healthcare network.
The 12.3% H1 2014 revenue growth in our Distribution division to $165.2m was a continuation of recent trends and benefitted from the introduction of new product lines during the past year, which have started to deliver substantial market demand. EBITDA at the division reached $16.5m with margins of 10.0% (+12bps YoY).
The Fast Moving Consumer Goods (FMCG) segment, which remains the largest revenue contributor in this division, achieved 7% growth YoY. Sales increased by a particularly strong 53% in the Food & Catering segment and 16% in Pharmaceuticals. Meanwhile, revenue contribution from Scientific Equipment dropped by 12% as a direct result of recently allowing our hospitals to procure equipment from any distributor, as opposed to being restricted to our Distribution division.
Population growth, new product introductions, price increases and increased shelf space for our products by the distribution team in an expanding retail market led to this level of growth.
Board and Management
As announced on 26th June 2014, six new Directors joined the Board following the Annual General Meeting. Mrs Salma Hareb, CEO of Economic Zones World in the UAE and Dr Ayesha Abdullah, Managing Director of Dubai Healthcare City Authority Regulator in the UAE, join the Board as Independent Non-Executive Directors.
Mr Keyur Nagori, CFO of KBBO Group in the UAE and Dr Nandini Tandon, Vice Chairman of El Camino Hospital, Silicon Valley, California, USA, joined the Board as Non-Executive Directors.
In addition, Mr Binay Shetty, COO, and Mr Prasanth Manghat, CFO, joined the board as Executive Directors.
Summary and Outlook
The general macro-economic outlook in the UAE remains positive. The on-going population growth, which is led by the inflow of expatriates, coupled with increasing medical insurance penetration rates continue to expand the UAE healthcare market size and thus the prospects for NMC Health.
The roll-out of mandatory healthcare insurance in Dubai is expected to be another catalyst for growth from 2015 onwards. Dubai Health Authority estimates that around 66% of the almost 3m residents in Dubai stand to benefit from this decision in the coming years as the roll-out is phased over almost two years starting from the end of H2, 2014.
The Board views the outlook for the remainder of FY 2014, and FY 2015, with confidence.