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NMC Health remains confident of growth

By Oliver Haill

Date: Monday 10 Dec 2018

NMC Health remains confident of growth

(Sharecast News) - NMC Health said its cash flow generation was improving in the second half of the year, as the Gulf region hospital operator reaffirmed full year sales and profit guidance.
The FTSE 100 group also highlighted the winning of a new operations and management contract with the UAE Ministry of Presidential Affairs to manage a hospital in Seychelles.

NMC said this comes on the back of several smaller "but strategic" O&M contracts in the UAE, which the company believes "significantly support NMC's profile and visibility". These high-margin contracts have included the managing of the medical clinic in the Louvre Museum, Abu Dhabi, the grand mosque in Abu Dhabi and the court of the crown prince.

After an increased number of holidays in the first half of the year had led to slower receivables collection for the Distribution business and therefore to a slight extension of receivable days outstanding, receivables collection had continued to normalise in the second half, with a positive impact on cash flow generation.

Following the recent capital markets day, where the group first flagged-up its new financial guidance for calendar 2018 and 2019, directors said feedback from institutional shareholders had led to the revision of performance targets for management long-term incentive plans.

As a result, the board's remuneration committee will increase the requirement for EBITDA growth for management bonuses for the 2019 financial year from 5-15% to 10-18% at threshold and maximum respectively. Chief executive Prasanth Manghat said this would "bring them more in line with shareholder value creation".

The committee will also add a new clause, where if management fails to meet an "underpin" capturing the conversion of EBITDA to net income, the LTIP awards will be halved.

NMC also repeated its guidance from that investor meeting of 24% growth in sales and 36% in earnings before interest, tax, depreciation and amortisation for the current year.

For 2019, guidance was also reiterated, for at least 22-24% revenue growth and 18-20% EBITDA growth. Excluding the impact of acquisitions completed in 2018, revenue growth is anticipated to be 12-13% and EBITDA growth approximately 15%. The ratio of year-end net-debt to EBITDA is expected to reduce to 2.2-2.4 times.

Manghat hailed the strong performance of the group's operations and the board's confidence in its guidance for 2018 and 2019 and said the NMC's growth is driven by "a combination of 1) our strategy of offering complex, high value services well beyond simple multi-specialty, 2) maintaining an expansive footprint in our target markets, particular in the UAE where we are the only private player present in 6 of the 7 emirates and 3) offering healthcare for all, with no specific focus on one economic segment of patients."

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