NMC Health plc, the leading integrated private healthcare network operator in the United Arab Emirates and one of the leading global providers of fertility treatments through its European and Middle Eastern subsidiaries, on Wednesday announce its interim results for the six months ended 30 June 2016. Reported revenues increased by 46.9% year-on-year (YoY, compared to H1 2015) to reach $578.3m in H1 2016 ($ 393.8m in H1 2015). EBITDA reached $115.9m (+68.2% YoY), resulting in a Group EBITDA margin of 20.0% (+254bps YoY). Adjusted net profits attributable to shareholders increased to $67.8m (+48.2% YoY) Basic EPS reported at $0.336 (H1 2015: 0.213); Diluted EPS at $0.334 (H1 2015: $0.213); Adjusted EPS at $0.365 (H1 2015: $0.246)The strong performance of H1 2016 was underpinned by progress across the business and successful execution of our long-term two-stage strategy which has are spend retention, delivery of increased complexity and thus higher value added care within our hospitals to the growing patient population of NMC. Today "our healthcare network includes the first private sector advanced tertiary and quartenery care capable hospital, benefiting from NMC network cross-referrals and third-party referrals. All new hospitals and medical centres that opened in 2013 and 2014 achieved breakeven ahead of initial guidance and NMC Royal, which opened in September 2015, is on-track to meet the guidance EBITDA breakeven period of 24 months. Both DIP General Hospital and Brightpoint Hospital have ramped up operational beds from being around 50% of licensed capacity when they commenced operations to 72% and 100% respectively as of the start of 2016. The second stage of our strategy which was initiated at the beginning of 2015 entailed a shift in focus from capacity to capabilities. NMC's objective was to accelerate its expansion into higher medical complexity and thus higher value added specialty healthcare segments through the acquisition of leading global and regional entities and the subsequent establishment of new strategic multi-brand verticals capable of unlocking synergies within the enlarged group and act as stand-alone platforms spearheading the expansion beyond the UAE into some of most accretive healthcare market segments. As a result, the Group healthcare asset and brand portfolio is today more diversified with significantly enhanced competitive advantages and substantially augmented strategic optionality allowing NMC to expand its growth horizons in what is an increasingly challenging market for static market actors. The combination of this progress with a more optimised resource allocation is leading to a substantially higher growth, margin and return profile. During the period total patient visits to Group assets increased by 42.6% YoY to 2.1m and more importantly the Group healthcare services revenue per patient increased by 35% to US$170 despite very moderate price increases which are broadly consistent with recent trends. This growth was mainly achieved through the entry into higher complexity, less ‘commoditized', and thus increased value added medical services segments (examples include advanced tertiary and quaternary care, specialized maternity services, long-term care and fertility services). In fact, NMC's H1 2016 top-line growth of 46.9% is the highest on record. In comparison, the five- year (2011-2015) Group revenue CAGR stands at 18.7%. With most of this recent growth generated through the strategic initiatives undertaken in the healthcare division (higher margin business, which includes four out of the five verticals), NMC has delivered considerable progress towards achieving another very important goal; increased healthcare business contribution to Group revenues and thus the relative dilution of the lower margin distribution division. The healthcare division contributed 66% of revenue in H1 2016 compared to 55% in H1 2015 and 48% at the time of IPO in 2012. While the absolute growth of the distribution division (lower margin business, which includes one out of five verticals) continues to be good at 10.5% YoY, we expect the relative dilution trend will continue which should provide further support to higher future group margins. As a result, Group EBITDA reached $115.9m (+68.2% YoY) with a Group EBITDA margin of 20.0% (+254bps YoY) – a 412bps increase compared to the last financial year (2014) before NMC initiated the capabilities focused second stage of its post-IPO growth strategy. The healthcare division margins increased by 107bps YoY to reach 29.6% during the period. Meanwhile, margins of the distribution division remained almost unchanged at 10.2%.
