‘Aggressive’ NMC lifts profits and margin as expansion pays off

NMC, the health care group, boosted its earnings last year despite a rise in net debt and financing costs. (Photo courtesy of NMC)
Updated 07 March 2018
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‘Aggressive’ NMC lifts profits and margin as expansion pays off

LONDON: UAE private health care operator NMC boosted profit and revenue in 2017 following acquisitions but net debt and financing costs shot up as expansion led to rise in borrowings.
The number of beds at its private hospitals increased from 679 to 1,365, up 101 percent year on year as growth took off. Net profit rose 38 percent to $209 million and revenue grew by a third to $1.6 billion.
Expansion meant net debt increased during the year from $431.3 million to more than $ 1billion, in line with management’s expectations.
“Net debt was equivalent to 2.9 times EBITDA (earnings before tax, interest, depreciation and amortization), remaining at a very comfortable level relative to the group’s cash flow generation capacity,” said a company statement.
The debt increase was “largely attributed to the acquisitions made during the year”.
The group’s largest acquisition during 2017 was the purchase of Al-Zahra Hospital that was financed via borrowings, but also utilized the proceeds of a share placing raising $322 million in December 2016.
Total finance costs for were $63.8 million compared to $41.7 million in 2016. “This was mainly on account of the higher facility amount availed to refinance the existing debts as well as to finance the acquisitions,” said the company.
It added: “Overall, our growth in revenue and improved profitability are attributed to both an improvement in performance of our existing hospitals and medical facilities and the acquisitions made within the Middle East, Europe and South America over the last 2 years.”
Pursuing an “aggressive international expansion program from 2016”, the company now has over 35 percent of its licensed bed capacity in the Kingdom of Saudi Arabia, where the company has introduced long-term and multi-specialty care services. The enlarged group received over 5.7m patients in 2017.
Prasanth Manghat, CEO said: “We see 2017 as setting the stage for many more years of growth for the company and we begin 2018 with confidence.”
Higher margins associated with the health care business continued to elevate overall group margins, with consolidated EBITDA margin reaching 22 percent in 2017, up 180 basis points year on year, added Manghat.
With the health care division remaining the primary focus of NMC’s organic and inorganic expansion plans going forward, “the trend of increasing contribution from this segment to group’s revenues and profitability is expected to continue for the foreseeable future”.
NMC is a constituent of London’s FTSE 100 Index where the shares fell 3 percent on Wednesday.


New oil, gas projects to accelerate next year

Updated 17 December 2018
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New oil, gas projects to accelerate next year

  • Global investment in oil and gas production is expected to reach around $425 billion next year
  • Many of the new projects will be around gas, with a record number of liquefied natural gas (LNG) projects

LONDON: The number of new oil and gas projects will rise five-fold next year from a 2015 trough but overall spending is still unlikely to be enough to meet future demand, consultancy Wood Mackenzie said in a report.
Shaken by a sharp drop in oil prices in recent months, boards are generally expected to stick to spending discipline imposed following the 2014 price crash.
Global investment in oil and gas production, known as upstream, is expected to reach around $425 billion next year, according to WoodMac analyst Angus Rodger.
That compares with a total spending of $770 billion in 2014, which dropped to $400 billion in 2016 and 2017.
Although spending levels have slightly recovered since then, next year’s capital expenditure will still fall short of the $600 billion required to meet demand growth and to offset the natural decline of output from fields, Rodger told Reuters.
A handful of the world’s top oil companies, including US giants Exxon Mobil and Chevron, said they would boost spending next year as they accelerate developments of highly-productive shale fields.
But overall, companies will seek to maintain spending largely flat in order to return cash to investors after years of pain, Rodger said.
Still, deep cost cuts introduced in recent years and lower rates for drilling rigs and services mean that companies can do more with their money.
In 2019, the number of large new oil and gas projects is expected to reach up to 50, compared with 40 in 2018, and around 10 in 2015, according to WoodMac’s 2019 outlook. Large projects hold over 50 million barrels of oil or gas equivalent.
Many of the new projects will be around gas, with a record number of liquefied natural gas (LNG) projects set to get the green light in 2019.
Those include the Arctic LNG-2 in Russia, at least one project in Mozambique and three in the United States, which would together require $50 billion, according to the report.
“The stars are aligning on LNG sales contracts, corporate appetite, long-term demand and costs. But these are huge investments, and investor confidence could waver if we see signs of cost inflation, global recession and falling prices.”
The LNG projects will target 100 trillion cubic feet of gas, up from 80 tcf in 2019 and 32 tcf in 2017.
Spending could see a strong increase in 2020 if oil prices continue rising steadily and as rig costs are expected to rise, Rodger said.