High finance costs and a miss in earnings per share at NMC Health (NMC) have taken a shine off an otherwise strong set of annual results, prompting an 8.3% decline in the shares to £27.49.
The private hospital operator said finance costs hit $121.3m in the year ending 31 December 2018, including a non-cash component of $28.5m, which was 35% higher than broker Jefferies’ estimate of $89.6m.
These costs impacted adjusted earnings per share at $1.33, representing a 6% miss compared to analysts’ forecasts.
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Over the last year, shares in NMC Health have fallen 16.2%.
SALES AND EARNINGS SMASH FORECASTS
Despite the setback, there is plenty of positive news in the latest numbers as both sales and earnings before interest, tax, depreciation and amortisation (EBITDA) beat analysts’ expectations.
Sales rose 28.3% to approximately $2.1bn, higher than analysts’ forecast of $2.01bn while EBITDA hit $487.4m compared to consensus expectations of $478m.
The earnings beat was mostly driven by the significant acquisition of cosmetic surgery specialist CosmeSurge last year, which contributed $25m to overall earnings.
Investment bank HSBC analyst Raj Sinha says NMC addressed investor concerns as working capital improved and organic growth was strong despite recent worries over organic growth in the United Arab Emirates.
‘We believe the group is placed well compared to competition due to its presence across income segments and its ability to generate revenue synergies across verticals,’ comments Sinha.
2019 GUIDANCE REITERATED
Looking ahead to the year ahead, NMC anticipates between 22% to 24% year-on-year revenue growth and an 18% to 20% rise in EBITDA, in line with upgraded guidance in late October.
The company recently signed definitive agreements for a joint venture in Saudi Arabia with Hassana Investment Company, which requires an additional cash injection by NMC for a 52% stake.
‘We await further details as it is unclear whether this is a physical cash injection or could infer potential additional assets go into the joint venture,’ comments Jefferies analyst James-Vane Tempest.
