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Financial Analysis Of The Qeiicc
Financial Analysis Of The Qeiicc
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Overview of the QEIICC AccountsThe functions of the QEIICC are spelt out in the statutory instrument 933. They are to provide conferencing and any other related services regarding conference. The main objectives, responsibilities, and goals are set out in a framework document and are issued by the secretary of state. The accounts of the conference are prepared in accruals basis and must be approved by the treasury. The accountants are required to prepare the accounts statement as per the going concern basis.
The chief executive is the accounting officer and has the responsibility to provide a governance statement that highlights internal control system within the conference. The statement shows how the conference centre has achieved its responsibilities and policies that it is mandated to carry out. It must give guidelines on how it will protect and safeguard public resources. The chief executive must give conclusive report pertaining to the financial base of the conference and the report should be timely in every period.
The QEIICC has an audit committee that is made up of three non -executive directors and the chief executive officer who is always in attendance. The main tasks of the committee is to oversee the risk management process within the conference center and are to continuously review the centre of the risk register. The chief executive has to chair monthly meetings where agenda of the meeting are taken by the secretary to the committee. Major reasons for the monthly meetings are to review monthly management accounts presented by the finance officer.
The middle managers or operational manager meet once a month throughout the year to discuss all matters relating to operational activities of the conference. The risk management department has directors and managers whose work is to provide a regular report on the management of risks in their areas of operations and responsibilities. They also give a summary report on key projects the conference centre intends to carry out. The work of the risk management team is cross checked and assessed by the management working group and internal auditors.
There is a system of internal control that is designed to manage risk in areas that are prone to business risk and also to eliminate any failures that can accrue during business operations. Internal control system enables the centre to attain its goals by providing adequate policy guard lines to be followed during risk management. However, the system can only provide reasonable and not absolute risk assurance.
Introduction to the Financial Accounts
The meetings and conference market for many years has remained depressed with clients being cost conscious and this has led to fall in the ratio of rooms hired for conferences. The trend has led to cancelation of many bookings fees that have reached the peak of the year. However, reduced revenue opportunities have prompted a proportionate reduction in cost of doing business.
The major reason for the conference is to promote the business enterprises forward in the ever dynamic environment and also to increase business occupancy to get more revenue. The conference was to address weighty issues relating to business activities in London. The matters include a proportionate drop from reduced government bookings, how significant efficiency savings have been achieved and the viability of the business.
QEIICC Corporate Plan
Since business environment is ever dynamic in the whole world, an inclusive corporate plan will be a major boost to many institutions with elaborate corporate plan. In London during the QEIICC the corporate plan were designed to address various business ideals that include ; how to achieve major savings, to address the challenging times in the business cycles, how to share the dividends paid over the period, to maximize future financial returns and, to restructure fixed cost based in London.
The plan was to tackle strategic goals and objectives to be achieved in the near future. The core corporate plans were to; meet the financial objective of the trading fund order as spelled out in the treasury minutes, maintain the interior of the building brand its services and maximize the revenue generated. Improving services available to customers through continuous upgrading of facilities also was capture in the corporate plan. This was to go hand in hand with improving the standard of services delivered to customers and ensuring that all staff are properly trained, motivated and have the opportunities to develop their skills. Finally maximizing the net surplus from trading activities and property disposal to achieve the best value for the taxpayer and the government was to be capture in the corporate plan.
Revenue Breaks Down
From the revenue breakdown analysis, it can be pointed out that the revenue collected in the financial year of 2012/2013 was relative higher than the previous period of 2011/2012. The following items contributed towards the net increase in the revenue of the QEIICC; room hire, catering commission, other minor income, conference activity and, other rental income. However, there was a slight reduction in revenue from audio visual services and information technology services.
The revenue breakdown shows less improvement in the revenue collected in the current year compared to the previous period and hence stringent measure should be put in place to widen the revenue collection. Nevertheless it should be noted that the revenue collected for the 2012/2013 financial period was below the budgeted one. This can be attributed to the unanticipated reduction in room occupancy during the Olympic Games as several organizations failed to place their orders.
Financial Case Study of the QEIICC
The case study shows that there has been a significant increase in the hotel approximated to be at 70 percent. This was attained through vigorously marketing the conference rooms both internationally and locally. The QEIICC benefited from an extensive booking with the National Organizing Committee from Italy contributing a lot towards it. This enables the projected revenue to exceed the budgeted one hence leading to a net surplus, and the credit for the good work goes to the Centre team members who an aggressively collected marketed the conference.
The summary of performance against targeted shows that payment of two million, two hundred and fifty pounds was made to the exchequer, and that met the financial target. The occupancy level attained that period rose to fifty eight point four percent and was below the targeted one which stood at sixty four percent. It further shows that the accounts were audited and certified by the auditor. The auditor statement reads,” I certify that I have audited the financial statement of the Queen Elizabeth II Conference Centre for the year ended 31 March 2013 under the Government Trading Act 1973”. The auditor opinion shows that the financial statements were prepared according to the accounting standards, principles and practices. Further, the auditor’s opinion shows that all material facts in respect to the expenditure and income recorded in the financial statements have been adhered to and that the statements conform to the authorities that govern income and expenditure.
The statement of financial position of the Conference Centre for the period ended 2012/2013 shows that the total non-current assets sum up to £1,642,000 and the current assets were at £11,867,000, and that leads to a total of £13,509,000 for the value of the assets. The value of property, plant and equipment for the year 2012/2013 was less than those in the year 2011/2012 by a margin of £580,000. Intangible assets also reduced from £7,000 to £2,000 in the same year and that consequently to a reduction in the value of non-current assets compared to the previous period. However, there was an improvement in the value of current assets for the year 2012/2013 compared to the year 2011/2012. This increase in the current asset was attributed to the increase in the value of cash and cash equivalent which increase from £9,127,000 to £10,749,000 for the current period.
The total current liabilities for the year 2012/2013 were less than that of the year 2011/2012 with a margin of £606,000. This was attributed to the reduction in the value of trade and other current payables. There was also a reduction in the value of total non-current liabilities for the period 2012/2013. From this revelation, it is clear that the current assets both in the previous year and current year are higher than the current liabilities in those periods. This means that the conference can meet its current debts efficiently by paying their liabilities off without borrowing money from other external sources. The Conference Centre is safe and cannot be liquidated since it can use the available current assets to offset the current liabilities. The comparison between the non-current assets and non-current liabilities for the two periods indicate that the non-current assets are higher than the values of the non-current liabilities hence the Conference Centre cannot be placed under receivership as it can pay all its debts as they accrue.
The statement of the financial position shows that the total value of non-current assets for the current period is relatively lower than the previous period, and this can be attributed to either depreciation of the current assets or disposal of the current assets. The current assets for the year 2012/2013 is higher than the value of current assets in the year 2011/20112, and this makes the Conference Centre at a better place to settled its immediate debts in the current year and also to purchase equipment with the extra cash at hand.
The Conference Centre, in the current year has reduced their current liabilities compared to the previous year, and this is commendable for the Conference Centre since current liabilities are treated like current expenses, and a reduction in expenses means an improvement in the firm’s profitability. The non-current liabilities for the current period have also decreased in value from £144,000 to £123,000. The whole summary of the financial position of the Conference Centre indicate fine financial progress in managing the available resources.
Comprehensive Net Income Statement
The statement of net income indicates that there is an increase in the revenue collected in the year2012/2013 compared to the year 2011/2012. The revenue base Conference Centre has improved, and this can be attributed to sound investment policies laid down by the management. However, the depreciation and amortization for the current period has increased from £801,000 to £810,000 implying that more assets had depreciated in the current year than the previous year. The overhead costs and expenditure for the current year has gone down. Both the staff cost and other expenditure has relatively reduced, and this increases the operating profits for the conference centre. Reduction in staff cost could have been cost by the introduction of information technology where on few workers may be required to do the job. Retrenchment of staff can also leads to reduction in the staff cost.
Both the operating surplus for the year 2012/2013 and interest receivables have increased, and that has led to increase in the value of operating surplus for the year after interest. The same period show a reduction in the amount of money paid to the exchequer and retained surplus deficit too was reduced. Therefore, the statement shows a positive net income for the year ended 2013 since there was an improvement in the total revenue collected a couple with a reduction in the major in expenses incurred by the Conference Centre.
Statement of the Cash Flows
There is a general increase of cash flow in the year 2012/2013 compared to the year2011/2012. The cash flow generated from operating activities like operating surplus after interest rose from £2454,000 to £3510,000 posting a positive value. In overall, net cash flow from operating activities in the year 2012/2013 was £4,071,000 compared to £3,748,000, and this is a clear indication that more funds came in into the organization. There was also an increase in the value of cash flow from financing activities, for example, payment to the exchequer rose from £1,200,000 to £2,250,000 in the current period.
Statement of Changes in Taxpayers’ Equity
The statement for the period ended 31 March 2013 shows that the compressive net income for the year the balance as at April 2011 was -£1,254,000, and that in March was £9,617,000 indicating sustainable value for the taxpayers’ equity. In summary, the financial statement of QEIICC has shown sound financial accountability and transparency. The fact can be proven by how the accounts are prepared to use the accounting principles and how the management is held accountable for their work.
Fear is a vital human emotion
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Is Fear a Necessary Component of the Human Experience
Introduction
Fear is a vital human emotion that helps keeps individuals from danger and prepares them to take action but at the same time leads to permanent feelings of anxiety. Fear refers to a condition of being worried or afraid about the outcome of something. As human beings, we all face different types of fears through the various stages of our lives. This begs the question as to whether fear is a necessary component of the human experience. Fear has both negative and positive impacts. Fear is not particularly a bad thing; sometimes having fear can also be a good thing. Fear is an emotion triggered by a threat that has been perceived. Fear is a survival mechanism which signals our bodies to react to danger with a flight or fight response, making it essential in keeping people safe. Without a doubt, although fear has its fair share of negative impact on a person’s wellbeing, it is a necessary component of the human experience. This essay explores both the positive and negative impacts of fear on an individual.
Background Information
Fear is a human emotion that is powerful, primitive, and natural. The emotion is a combination of individual emotional response as well as a universal biochemical response. Fear points to the presence of a threat or danger whether psychological or physical. Although at times fear stems from real threats, it can also emanate from dangers that are imagined. Fear can be a symptom of mental health conditions such as post-traumatic stress disorder (PTSD), panic disorder, phobia, and social anxiety disorder. Fear has two reactions towards a perceived threat; emotional and biochemical reaction. Furthermore, fear has both emotional and physical symptoms. Each person encounters fear differently. Some of the common symptoms of fear include chills, chest pains, nausea, dry mouth, rapid heartbeat, sweating, shortness of breath, trembling, and an upset stomach. Additionally, fear is also characterized by psychological symptoms of fear such as feeling upset, out of control, overwhelmed, and a feeling of impending death (Dillard, 1011). The diagnosis of fear has to be done by a doctor. They often carry out a physical exam and laboratory tests to ensure the anxiety and fear are not linked to any underlying medical condition. Because fear is largely a complex issue, its causes vary. Some of the common triggers of fear include future events, imagined events, real environmental dangers, the unknown and specific objects or situations including insects, height, and flying.
Supporting Arguments
Fear Helps Keeps Individuals Safe
One of the main reasons why fear is a necessary component of the human experience is that it helps in keeping people safe. Emotions of fear often act as an alarm for any internal danger. Fear compels a person to take action by making prudent and wise decisions. If fear did not exist, it would be impossible for people to live long as they would not be aware of the threats around them. For instance, because of fear, a person darting across a road which is busy is able to react in a split second if they see a speeding car racing towards them. Fear is in this case has a positive outcome. Whenever a person is scared, their body reacts physically to enable them to handle the impending danger in what is called the flight or fight response (Pittig, 120). If fear did not exist, people’s response would be in jeopardy. They would not have the strength, speed, focus, and energy to flee or fight. It is for this reason that fear proves to be a necessary component of the human experience.
In the Right Dose Experiencing Fear is Fun and Exiting
Another reason why emotions of fear are necessary components of the human experience is that in the right dose, fear can be fun and exciting. Notably, many people tend to scare themselves deliberately particularly in horror movies and Halloween. Here you see movie characters riding roller coasters, shooting notorious water rapids, and going sky diving. Whenever people step outside their comfort zone, fear makes them feel alive. For them, it is fun and exciting. They generate excitement which helps them eliminate depression through increasing adrenaline which increases excitement, arousal, and glucose that is converted into energy. The way caffeine puts a person in an optimal state of performance but in high levels is detrimental and can make a person crash, so does fear boost adrenaline. In essence, a dose of fear erases the mind. Thinking of everyday worries and pressures is nearly impossible when a person is feeling scared or experiencing fear.
Fear Enables People to Live Life to the Fullest.
Living life without limitations is another reason why fear is a necessary component of the human experience. Whenever a person is afraid of something, they have a choice; to let the fear stop them or to face the issue head-on and build on the opportunities and possibilities that present themselves in life. When one is afraid, it is a pointer that a section of your life is holding you back. For instance, if a person has a phobia of flying, and they gather the courage to face their fears and step into an airplane, they will get to travel and see the world. Travelling adds to your experiences by creating a varied life which is rather rewarding. It also means living life with fewer regrets.
Fear leads to Empowerment and gives off a Natural High
Another reason why fear is necessary is that it yields empowerment. This is because when a person conquers their fear and they accomplish their goals, it makes them feel empowered. Fear is energy. When a person experiences fear, chemicals such as adrenaline, dopamine, endorphins, oxytocin, and, serotonin are released (Johansson, 265). Serotonin in particular helps the brain to function more efficiently. For instance, a runner that tackles three miles every day is much less likely to perform well if they find an unfamiliar place with precarious footing as it is bound to make them a little scared where they need to focus more. The brain is always seeking new challenges as its key to neuroplasticity. It is natural that every time a person completes a challenge or completes a goal, they feel empowered. The biological high lasts longer than the time one spends feeling scared. Ralph Emerson notes that by the time a person decides to do something that scares them, they have already produced the energy they need to achieve it.
Counterarguments
Chronic Fear has Serious Health Implications
Although fear has the advantage of keeping people safe, empowering people, and enabling them to live life to the fullest, it also bears an equal share of downsides. When people live in constant fear, both their physical and mental well-being is at risk. Fear makes the immune system weak which is likely to cause cardiovascular damage, fertility problems, and gastrointestinal problems including irritable bowel syndrome and ulcers. These problems have been linked with premature death and accelerated aging. Fear also has direct implications on the memory. It impairs the development of long-term memories and causes damage to various parts of the brain including the hippocampus. This makes the process of regulating fear difficult and makes the person anxious the majority of the time. For someone who is living in constant fear, the world is a scary place for and memories they have can confirm it. Additionally, fear interrupts the processes occurring in the brain of an individual which allow them to act ethically, control emotions, reflect before acting, and make sense of non-verbal cues and other information relayed to them. Fear impacts the thinking and decision-making process negatively, leaving a person highly susceptible to impulsive reactions and intense emotions. These impacts can paralyze a person’s ability to react appropriately to a situation. Worth noting, fear has been linked with long-term consequences on mental health such as clinical depression, fatigue, and post-stress traumatic disorder (PTSD). Without a doubt, the above-mentioned health implications can be dire for individuals that are struggling to manage fear. Although chronic fear has serious health implications, the positive implications of fear cannot be ignored. The advantages of fear outweigh the disadvantages making fear a necessary component of the human experience.
Conclusion
Fear is a natural, primitive, and powerful human emotion. Fear refers to a condition of being worried or afraid about the outcome of something. As human beings, we all face different types of fears through the various stages of our lives which begs the question as to whether fear is a necessary component of the human experience. Without a doubt, although fear has its fair share of negative impact on a person’s wellbeing, it is a necessary component of the human experience. Fear is necessary because it helps in keeping people safe and enables people to live life to the fullest. Further, in the right dose, experiencing fear can be fun and exciting. Fear also yields empowerment and gives off a natural high. On the other hand, fear has the disadvantage of causing serious health implications including cardiovascular damage, fertility problems, and gastrointestinal problems. When people live in constant fear, both their physical and mental well-being is at risk.
Works Cited
Dillard, James Price, et al. “Fear responses to threat appeals: Functional form, methodological considerations, and correspondence between static and dynamic data.” Communication Research 44.7 (2017): 997-1018.
Johansson, Maria, et al. “Targeting human fear of large carnivores—Many ideas but few known effects.” Biological Conservation 201 (2016): 261-269.
Pittig, Andre, et al. “The role of associative fear and avoidance learning in anxiety disorders: Gaps and directions for future research.” Neuroscience & Biobehavioral Reviews 88 (2018): 117-140.
Financial Analysis of National
Financial Analysis of National
Medical Center Group Dubai
School
Table of Contents
TOC o “1-3” h z u HYPERLINK l “_Toc410121773” Background PAGEREF _Toc410121773 h 4
HYPERLINK l “_Toc410121774” About HealthCare Industry in UAE PAGEREF _Toc410121774 h 4
HYPERLINK l “_Toc410121775” About NMC Group PAGEREF _Toc410121775 h 5
HYPERLINK l “_Toc410121776” NMC Top Pick in Sector PAGEREF _Toc410121776 h 5
HYPERLINK l “_Toc410121777” Details of DCF analysis PAGEREF _Toc410121777 h 6
HYPERLINK l “_Toc410121778” About the founder PAGEREF _Toc410121778 h 8
HYPERLINK l “_Toc410121779” SWOT Analysis PAGEREF _Toc410121779 h 9
HYPERLINK l “_Toc410121780” Financial Analysis PAGEREF _Toc410121780 h 11
HYPERLINK l “_Toc410121781” Ratio Analysis PAGEREF _Toc410121781 h 12
HYPERLINK l “_Toc410121782” Profitability Ratios PAGEREF _Toc410121782 h 14
HYPERLINK l “_Toc410121783” Asset Utilization Ratios PAGEREF _Toc410121783 h 14
HYPERLINK l “_Toc410121784” Liquidity Ratios PAGEREF _Toc410121784 h 15
HYPERLINK l “_Toc410121785” Debt Utilization Ratios PAGEREF _Toc410121785 h 16
HYPERLINK l “_Toc410121786” Summary PAGEREF _Toc410121786 h 17
HYPERLINK l “_Toc410121787” Company Source of Funds of Revenue PAGEREF _Toc410121787 h 18
HYPERLINK l “_Toc410121788” Gross Patient Service Revenue (GPSR). PAGEREF _Toc410121788 h 18
HYPERLINK l “_Toc410121789” Net Patient Service Revenue (NPSR). PAGEREF _Toc410121789 h 18
HYPERLINK l “_Toc410121790” Adjustments to GPSR revenue to calculate NPSR include: PAGEREF _Toc410121790 h 18
HYPERLINK l “_Toc410121791” Private Payers PAGEREF _Toc410121791 h 19
HYPERLINK l “_Toc410121792” Health Maintenance Organizations (HMOs) PAGEREF _Toc410121792 h 19
HYPERLINK l “_Toc410121793” Preferred Provider Organizations (PPOs) PAGEREF _Toc410121793 h 19
HYPERLINK l “_Toc410121794” Point of Service (POS) PAGEREF _Toc410121794 h 19
HYPERLINK l “_Toc410121795” Indemnity insurance PAGEREF _Toc410121795 h 19
HYPERLINK l “_Toc410121796” Uninsured PAGEREF _Toc410121796 h 20
HYPERLINK l “_Toc410121797” Other Operating Revenue PAGEREF _Toc410121797 h 20
HYPERLINK l “_Toc410121798” Investment Income PAGEREF _Toc410121798 h 21
HYPERLINK l “_Toc410121799” Unrestricted Donations PAGEREF _Toc410121799 h 21
HYPERLINK l “_Toc410121800” References PAGEREF _Toc410121800 h 22
HYPERLINK l “_Toc410121801” Appendix PAGEREF _Toc410121801 h 23
HYPERLINK l “_Toc410121802” Financial Summary PAGEREF _Toc410121802 h 23
HYPERLINK l “_Toc410121803” FY2013 Financial Highlights –A year on year comparison PAGEREF _Toc410121803 h 26
HYPERLINK l “_Toc410121804” FY2013 Business Highlights – A year on year comparison PAGEREF _Toc410121804 h 26
Background
About HealthCare Industry in UAEThe healthcare sector in the UAE is mainly managed by the government through the Ministry of Health (MoH) and the authorities Emirate. Each Emirate has its own health authority, like Dubai has DHA, (Dubai Health Authority), Abu Dhabi has HAAD. UAE government has tried to make UAE as the regional tourism hub. It is promoting medical tourism. UAE government has introduced compulsory health insurance, which has been followed by each emirates, in its own way. AS per Collins, after compulsory health insurance was introduced to Abu Dhabi, the revenues of most of the private hospitals doubled in subsequent years (Audit, 2014). In 2013, Dubai has also included the insurance plan in it system and has made it mandatory for everyone to have medical insurance
In UAE, there are total 88 hospitals, which include private and public sectors. These organizations provide various services related to healthcare industry. The total bed were 9176, by end of 2011. So, each hospital has on the average of 104 bed per hospital. Dubai & Abu Dhabi has 35 no. of hospital each, as per Colliers international 2013
The private sector contributes to 2/3rd of the total no. of hospitals.
About NMC GroupNMC is a healthcare group in the United Arab Emirates (UAE). Its headquarters are in Abu Dhabi, UAE’s NMC has branches capital in other emirates. Of UAE, which include Dubai, Sharjah & Al Ain. National Medical Company is listed on the London stock Exchange (LSE), since 2012. It is a part of the Foreign Trading Stock Exchange (FTSE).
NMC Healthcare group was created by H.E. Abdulla Humaid Al-Mazroei & B.R. Shetty, in 1975. It grew up and opened hospitals in Deira (1999) and Al Nadha (2004) in Dubai, in Al Ain (2008) & recently opened hospital in Sharjah, as well.
NMC has diversified into other lines of businesses, other than hospital & NMC. NMC has also ventured into pharmacies, hospitality (Foodland restaurant), financial services (UAE exchange is one of the prominent business), jewelry, education, advertisement, real estate, information technology & pharmaceuticals (NMC, 2014).
NMC is a very socially responsible company. This healthcare group is a sponsoring a cricket team, which has won many titles.
The NMC healthcare group is a composition of NMC Healthcare Division and NMC Distribution Division.
NMC Healthcare includes:
Abu Dhabi Specialty Hospital, Al Ain Specialty Hospital, Dubai Specialty Hospital, Dubai General Hospital, Sharjah Medical Centre, BR Medical Suites, NMC Day Surgery Centre in Mohammed Bin Zayed City & Third party hospital operations & management. In addition to this, NMC is adding new assets, medical facilities to the existing hospitals in Abu Dhabi & Dubai.
Segments
NMC distribution division includes wholesale of pharmaceutical goods, medical equipment, cosmetics, food and IT products and services.
NMC Top Pick in SectorNMC Health exchanges at an 18% and 8% rebate to EM social insurance peers on the premise of 2014e P/E and EV/EBITDA products, separately. While some markdown is supported because of the way that NMC’s plan of action incorporates an appropriation segment, which offers lower development and edges than the medicinal services part, we regardless view the valuation crevice as extreme. Our examination recommends a reasonable estimation of GBP 5.51/offer for the organization, 21% over the predominating business sector cost (Audit, 2014). Also, provided for its current system of three social insurance offices in Dubai (2 hospitals and one facility), alongside expected opening of an alternate clinic in Q2 14 (DIP Hospital), NMC is best situated among the recorded human services organizations to profit from the progressing take off of obligatory protection in Dubai. We along these lines feel that the organization offers the best esteem to speculators inside our social insurance scope and positions as our top pick in the part.
Details of DCF analysisOur DCF-based valuation of NMC has expanded to GBP 5.87/offer, 55% higher than our past evaluation of GBP 3.79/offer. Key elements driving the higher valuation are:
Fundamentally lower capital use of USD 293mn over our 5-year gauge period versus USD 419mn in our past model (use on various key ventures, for example, Brighpoint and DIP hospital is generally finish).
Our past model expected that NMC’s present 5-year contract to oversee Sheik Khalifa Hospital would not be restored upon fulfillment. Given the organization’s solid execution to date in working the office (NMC created Usd5.4mn from the agreement, meeting all its Kpis) and the predominating absence of supply of value healing facility administrators, we now feel that this suspicion is excessively moderate. Our amended model expect that the agreement will be replenished upon fulfillment (Colliers, 2014).
By moving the time of DCF investigation 1 year forward, Free Cash Flow in the most recent year of our unequivocal figure period (which structures the premise for Terminal Value) increments fundamentally from USD 102mn to Usd152mn. This is determined by a mix of 1) better usage at existing and new social insurance offices and 2) commitment from Third Party Management Services (administration of Sheik Khalifa Hospital), which was at one time rejected in our model.
We have brought down the expense of value from 12% to 11%, in accordance with that used for Al Noor. This reductions our WACC to 8.8% versus 9.2% in our last valuation.
About the founderB R Shetty is CEO & MD of the NMC Group of Companies & UAE Exchange. He is a trained pharmacist and he spotted an opportunity in the co acquired National Hospital, in Abu Dhabi. Today, this group has hospitals and NMC all across UAE and has patient base of more than one million, a year. Shetty has been awarded for Padmashree and Pravasi Bharatiya Samman. He is also the chairman of Abu Dhabi Indian School, AD, UAE. Shetty is involved in many philanthropic activities. He has investments in India as well, in medical institutions. He is founder member of the Indian Pharmaceutical Association in UAE. He is member of:
Advisory Board of Financial Sector),
Economic Department, Government of Dubai, UAE &
Pharmaceutical Committee, Dubai.
He is also the chairman of Abu Dhabi Indian School, AD, UAE. Shetty has been awarded for Padmashree and Pravasi Bharatiya Samman.
SWOT AnalysisSTRENGTHS: NMC has created competitive advantage through following those, its strengths include:
Market leader in healthcare plans segment: Special expertise, innovative service,
Market Capitalization Cost advantages, due to many branches,
Customer focused approach Cultural advantage, connected to Asians
Excellent reputation
Experienced staff
Latest Technology
International exposure
Diversification,
Easily accessible locations of the hospitals.
WEAKNESSES: NMC might need improvements in following:
Too much reliance on external funds
Targeting only Asians customers
Marketing gaps.
OPPORTUNITIES: Some significant trends exist in the market, which NMC can exploit, for its benefits, which include:
Some competitor’s leaving are market,
New & upgraded technology
Opening branches in neighboring gulf countries
Introduce new products to target specific segment of people: New market segment including Insurance business,
Diversification into niche market of commodity market, add new niche, or horizontal business.
THREATS: No one is immune to threats, NMC must consider these threats seriously, which includes:Competitor developing new product & service line,
New competitors like Americans, Canadian competitors are entering market and expanding,
Fast changing economic scenarios (economic shift), Changing Government regulations: new rules and regulations,
Change in insurance plans,
Competitors improved channels of distribution
Staff leaving for better prospects
Seasonality due to holidays, festivals Strengths
Financial AnalysisMost of the subsidiaries are 100% owned. The financial analysis of NMC Healthcare group include the above mentioned activities, together it is called ‘group’. NMC group follows IFRS, issued by IASB, for finalization and consolidation of its accounts. The functional currency is in UAE Dirhams, whereas the reporting currency is USD. The reporting period of financial statements in one year, i.e 1st Jan to 31st Dec (Colliers, 2014).
The primary economic environment influencing UAE and the effect of the local environment is limited to expenses incurred within the UK. The ability of the Company to meet its obligations and pay dividends to its shareholders is dependent on the economy of, and the operation of its subsidiaries in, the UAE.
Ratio AnalysisRatio Analysis
Year
S.No. Ratios 2009 2008
1 Gross Margin 33% 32%
2 Profit Margin 12% 12%
3 Operating Profit Margin 15% 19%
4 Return on Capital Employed 9% 8.30%
5 Return on Equity 19.30% 18%
6 Receivable Turnover Ratio 3.15 Times 2.70 Times
7 Average Collection Period 115 Days 133 Days
8 Fixed Asset Turnover Ratio 2.41 Times 2.42 Times
9 Total Asset Turnover Ratio 0.72 0.68
10 Current Asset Ratio 2.13 2
12 Quick Acid Test Ratio 1.91 1.72
13 Debt to Total Asset 52% 54%
14 Debt to Equity Ratio 110% 116.47%
15 Time Interest Earned 5.82 6.79
16 Inventory Conversion Period 94 days 80 days
17 Payable Deferral Period 76 days 76 days
18 Cash Conversion Cycle 133 days 137 days
To compare the position of the healthcare care group, am horizontal analysis has been done, which involved the evaluation of firm’
As NMC Health care is in related businesses i.e. related to the supply chain components of healthcare industry, the comparison is possible. The accounting principles followed are same, reporting dates are also same, even the functional/reporting currency is same.
Profitability RatiosThe company has been able to effectively generate and maintain the profitability of the company. The operations have been able to bring down the direct cost of the business, hence the profit from operations has gone up from 32% to 33%.
The company has been able to maintain a profit margin of 12%, year on year, this suggests that the company has been able to maintain the proportion of profit in sales steadily (Coyne & Hilsenrath, 2002).
The operating profit margins have gone down from 19% to 15%, which shows that the sales dollars which remains after the payment of all costs and expenses, except for interest and taxes.
The return on capital employed, has improved, from 8.30% to 9%, over the year.
The interesting fact to be understood here is that Cost of Capital is approximately 3% to 4% + EIBOR, approximately 7-8%. Hence the cost of capital is more or less equal to return on capital. The business has excel to improve it returns on capital employed, to cover up the short term, long term borrowings.
The responsibility of corporate governance is to take care of the interest of the shareholders of the company. The company has been able to generate better return to shareholders. The returns to shareholders have gone up. This means the market value of the share of NMC healthcare must have risen, after it got registered with FTSE, for fund raising, for its capital projects of starting new medical facilities in different parts of UAE.
Asset Utilization RatiosAlthough the receivable period has gone up, but the conversion cycles are too long. In the report, it is mentioned that funds are receivable from either government or insurance companies, which have long procedures, to release the payments. Even in some cases, company is doing impairment, to adjust the receivable, at the net realizable value. ‘An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. Amounts which are not significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates.’ (as per the NMC 2014 A)
In the same lines, the receivable time has down own from last year, but this make the operating cycle, very long. Hence the company should try to reduce the receivable cycle. On evaluation the payable deferral period, it came out that payable cycles are shorter than receivable cycles.
There is a which ‘negative will harm the operating float’, cycle of the company. This will lead to drying up of working capital, in the company. This situation will lead to liquidity crunch, in years to come.
Inventory turnover time has gone up. It generally consist of the medicines sold at pharmacies, the medical equipment etc. the inventory turnover is slow.
The total cash conversion cycle is still positive, but it’s too long, the operating cycle, for a healthcare should not be longer than 3 months.
Ideally this is the time, during which the patient is diagnosed and treated. The company has to work on reducing its cash conversion cycle, for betterment of working capital management.
Liquidity RatiosThe short liquidity is quite strong at this point of time, the current asset are almost 2 times the current liability. This is a very healthy position (Thomas, 2009). To go deeper into liquidity issues, the conservative approach of establishing the financial health in short term, can be done by taking out inventory from the current assets, which states that current assets are still better of and cover the liability fully. The operating cycles have no shortage of liquidity.
But, as the company has raised funds through borrowing, and invested in inventory, the current assets and liabilities may go up. So, even after considering that, company has comfortable liquidity position.
Debt Utilization RatiosThe company is highly financial leveraged, more that 50% of its assets are financed with debts. But looking at the trend, it is visible that management is trying to reduce the part of debt.
Same way, the firm’s financial leverage can be established, it is very highly leveraged in comparison to the equity invested. This is due to the company going public in 2012. NMC healthcare raised funds through IPO and registered the company at FTSE, to finance its capital projects (NMC, 2014).SummaryThe cost of capital is almost equivalent to return on investment, the group has been able to maintain the cost of capital=return on capital. This means that governance of the group is aiming at reducing the cost of capital by generating, higher returns.
The operating cycle has to be shorten down by increasing the payable cycle and reducing the receivable cycle. The cash conversion h point of time. To improve the operating cycle the float ha to because operating cycle has be less than 3 months, as the cash get stuck between the receivable and payable cycle (Coyne & Hilsenrath, 2002).
The group has to work on it, the operating profit margins have gone down from 19% to 15%. The inventory turnover is also slow, which can leads stocks of medicines getting obsolete, reducing the profit margins. The group has to follow strict regime for working capital management, otherwise the current liabilities will be more than the current assets, which will have drastic effect on the cash /operation cycle.
As company has gone for IPO in the international market, the company has to look into its operation. The money raised from international market through raising shares is payable through dividends, although the share value has gone up. The group has to more stringently follow on its finances, as the company is highly leveraged through these debts.
The group should convert all the projects into cash cows soon, as the project cost should not go up. If they are unable to do so, the capital raised from market will become expensive.
Company Source of Funds of RevenueOperating revenue— earned by conveying patient consideration is the first and essential way that hospital profit. This income is hide their sorted in hospital fund terms as horrible and net
Gross Patient Service Revenue (GPSR).
The measure of cash that NMC would make on the off chance that they were forked over the required funds (that is, the non-discounted rate) for the consideration they convey (complete inpatient and outpatient incomes before derivations). On the other hand, hospital professional vide most patient consideration at short of what full charge and never really gather their terrible patient administration income (Dhabi, 2009).
Net Patient Service Revenue (NPSR).
The aggregate sum of cash the clinic really gathers in the wake of deducting philanthropy care and contractual changes.
Adjustments to GPSR revenue to calculate NPSR include:Free care (also known as charity care) represents administrations accommodated which installment was never expected and for which the patient is not sought after. Tolerant qualification with the expectation of complimentary consideration shifts by state and (here and there) by clinic and is by and large focused around monetary circumstance (salary and resources). NMC esteem free care at full charges on their budgetary proclamations, yet this does not reflect the genuine expense of giving the consideration. (Note: Free care varies from terrible obligation in that awful obligation speaks to administration charges for which a doctor’s facility anticipated that will gather yet winds up not getting paid. For more detail on awful obligation see Section III.) (Hajat, Harrison & Al Siksek, 2012)
Contractual are payment arrangements with organized payers.
Different payers pay different distinctive sums for indistinguishable administrations. Medicare, Medicaid, and private insurance agencies arrange installment courses of action that are focused around expenses, recorded healing facility charges, or other criteria. The value that these gatherings have the capacity arrange shifts (they don’t all pay the same marked down rate) as does the installment strategy.
Private PayersThe private health insurance framework stands parallel to the general population Medicare and Medicaid programs. These payers get a premium— normally from a business in the interest of workers, yet at times from different associations or people to pay for the medicinal services its members need. Private payers arrive in a mixture of sorts
Health Maintenance Organizations (HMOs)
Pay for inpatient hospital administrations by DRG, outlay, or marked down charges. They might likewise pay by arranged capitation rates, especially in an “incorporated conveyance framework” where doctor’s facilities and doctors contract together.
HMOs pay for outpatient hospital services in two common ways:
By capitation, where a supplier is paid a certain sum every patient for a foreordained set of administrations. Capitation installments are frequently depicted regarding “every part, every month (Hajat, Harrison & Al Siksek, 2012).
Preferred Provider Organizations (PPOs)
Pay hospital for inpatient and outpatient consideration focused around an arranged rebate of the clinic’s ordinary charges. Out-of-system consideration is normally paid for at the hospital’s charge rate.
Point of Service (POS)Associations are a crossover of Ppos and Hmos. Installment by a POS tackles diverse structures, contingent upon the particular POS plan. A few POS arrangements pay for administrations utilizing the marked down expense for-administration strategy and some utilization capitation. Out-of-system consideration is normally paid at the healing facility’s charge rate.
Indemnity insurance
Is the conventional type of protection? Under reimbursement protection, arrangements pay for inpatient and outpatient doctor’s facility consideration focused around the hospital’s charges. This strategy can be considered practically identical to different types of protection, for example, auto protection. Reimbursement contrasts from other private safety net providers that utilization the charge for-service technique, for example, PPOs and a few Hmos—in light of the fact that repayment insurance permits the patient to see any specialist or go to any clinic they wish. This flexibility of decision and relative absence of limitations has a tendency to pull in individuals with more prominent medicinal service’s needs, subsequently repayment arrangements are costly and have significantly expanded the copayment and deductible peculiarities of their profit arranges as of late. Thus, the quantity of individuals safeguarded by repayment arrangements is diminishing.
UninsuredThe individuals who don’t have an open or private payer speaking to them in the human services commercial center speak to themselves. These are the uninsured, who must discover the intends to fund their own particular consideration. Pay toward oneself Uninsured or pay toward oneself patients pay whatever charges the healing facility posts as their charge or cost. In 1996, payers toward oneself paid, on assert age, 87 percent more than what their consideration really cost. As a correlation, private safety net providers paid, generally speaking, 22 percent over the expense of their consideration. Pay toward oneself additionally means uninsured, such an extensive amount a clinic’s potential pay toward oneself income winds up as uncompensated consideration.
Other Operating RevenueHospital likewise profit by giving administrations that are continuous business exercises, yet that are not specifically identified with the clinic’s fundamental mission of conveying patient consideration. While these exercises acquire critical and persistent streams of stores, the cash coming about because of these administrations and exercises is called other working income. Some normal classifications that make up other working income include:
i. Cafeteria sales
ii. Gift shop sales
iii. Parking garage fees
iv. Space or equipment rentals
v. Research grants
While it is presumably evident how a doctor’s facility advantages monetarily from rentals, cafeteria, blessing shop, and stopping carport charges, financing from examination gifts merits somewhat more clarification. NMC are an important coliseum for investigating new medications, medicines, and methods, and outside offices store doctor’s facilities to perform such research. The primary associations that store medicinal exploration incorporate the National Institutes of Health and the Centers for Disease Control and Prevention, two national government organizations. Hospitals additionally get subsidizing from pharmaceutical organizations to test new medications and items. Cash from exploration stipends can be a noteworthy wellspring of stores for a doctor’s facility, especially on the off chance that it is an educating hospital.
Investment IncomeInvestment Income is turning into an undeniably critical route for NMC to profit. Classes of attractive securities incorporate shared subsidizes, stocks, and securities. Distinctive hospitals have diverse speculation systems: a few NMC put resources into stocks or other securities that give higher returns at more serious danger, while different doctor’s facilities put resources into more progressive settled rate return instruments, for example, securities and currency business sector reserves. It might be hard to get a feeling of the hospital’s ventures from their budgetary proclamations, in spite of the fact that the general blend of stocks, bonds, and trade are frequently unveiled in for money the references of the reviewed monetary articulations. Since speculation Income can be a “black box” on the grounds that you can’t tell what a clinic is contributing or what the level of danger included is, it is critical to get some information about its venture technique.
Unrestricted DonationsNMC regularly get money related endowments from people and organizations that wish to help the healing facility’s mission. At the point when these stores are not guided to a specific reason, they are considered as non-operating income (once more) for the doctor’s facility and recorded thusly on the Income articulation. Note that this income is not a steady or dependable wellspring of cash for a doctor’s facility (World Health Organization, 2010).
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Colliers. (2014). Healthcare and Education Services. Available:
HYPERLINK ” http://www.colliers.com/en-gb/unitedarabemirates/services/healthcar” http://www.colliers.com/en-gb/unitedarabemirates/services/healthcare.Last accessed 12th Sept 2014.
Coyne, J. S., & Hilsenrath, P. (2002). The World Health Report 2000: Can health care systems be compared using a single measure of performance?.American Journal of Public Health, 92(1), 30-33.
Dhabi, A. (2009). United Arab Emirates. Countries and Territories of the World, 444.
Hajat, C., Harrison, O., & Al Siksek, Z. (2012). Weqaya: a population-wide cardiovascular screening program in Abu Dhabi, United Arab Emirates.American journal of public health, 102(5), 909-914.
NMC. (2014). NMC Profile. Available: HYPERLINK “http://www.nmc.ae/.%20Last%20accessed%2012%20Sept%202014.” http://www.nmc.ae/. Last accessed 12 HYPERLINK “http://www.nmc.ae/.%20Last%20accessed%2012%20Sept%202014.” Sept 2014.
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Appendix
NMC Health Plc
FINANCIAL REPORT: Full year ended 31 December 2013
5842013970
London, 25 February 2014: NMC Health Plc (LSE:NMC) (‘NMC’),theleading integrated private sector healthcare operator in the United Arab Emirates, announces its results for the full year ended 31 December 2013.
Financial SummaryUS$m (unless stated) FY2013 FY2012 Growth
Group Revenue 550.9 490.1 12.4%
Gross profit 185.5 160.3 15.7%
Gross profit margin 33.7 32.7 +98bps
EBITDA 92.9 79.6 16.7%
EBITDA margin 16.9% 16.2% +62bps
Net profit 69.1 59.8 15.7%
Net profit margin 12.6 12.2 +36bps
Earnings per share (US$) 0.367 0.343 7.0%
Dividend per share (GBP pence) 4.4 4.1 7.3%
Normalized operating cash flow 85.1 35.3 141.2%
Total Capital Expenditure additions in the year 82.7 118.9 -30.5%
Capital Expenditure relating to four capital projects announced at IPO 72.2 82.3 -12.3%
Total cash 268.7 257.5 4.4%
Total debt 332.4 303.6 9.5%
Net debt 63.7 46.1 38.0%
Divisional performances Healthcare revenue 289.3 251.6 15.0%
Healthcare EBITDA 81.7 68.2 19.8%
Healthcare EBITDA margin 28.2 27.1 +113bps
Healthcare occupancy 64.7% 60.5% +420bps
Distribution revenue 300.2 271.1 10.7%
Distribution EBITDA 29.9 26.2 14.1%
Distribution EBITDA margin 10.0 9.7 +30bps
Notes:
Normalised operating cash flow is a non-IFRS line item and is equivalent to Net cash from operating activities.
Total cash is represented by bank deposits and bank balances and cash.
Total debt is a non-IFRS line item and includes short term and revolving working capital facilities required for the operation of the Distribution division but excludes accounts payables and accruals, amounts due to related parties, Employee end of service benefit and other payable.
Net Debt is a non-IF