Al Hammadi eyes investment in privatized health sectors

Al Hammadi Development and Investment Co. will likely invest in Saudi Arabia’s health sector once the privatization program is launched, chief executive officer, Mohammed Al-Hammadi told Argaam in an interview.

All funding options are available in case of a potential investment opportunity, including a sukuk issue, loans, rights issue, strategic partners or internal funds, he said, noting that a capital increase would be another option.

The company finds local healthcare privatization opportunities more promising than those abroad, he added.

Saudi Arabia announced plans to privatize various public sectors and government entities last year, as part of a wide range of fiscal reforms under the Vision 2030 initiative aimed at diversifying the Kingdom’s economy.

The Saudi government currently offers 80 percent of healthcare services in the Kingdom. Once the privatization process is complete it will turn into a legislative and monitoring entity rather than a service provider, Al-Hammadi said.

The chief executive expects the Saudi health ministry to start using the private sector’s services and paying for patients medical costs after the holy month of Ramadan, he said, adding that mandatory health insurance would push demand towards private sector entities.

Al-Hammadi posted a net profit of SAR 27.9 million for Q1 2017, a 32 percent year-on-year (YoY) jump.

The profit increase was driven by the start of operations in Al Hammadi Hospital Al Sweidi and Al Olaya branch, the CEO said.

Al Olaya hospital had closed in February 2016 after an electrical contact incident.

The healthcare company is expected to maintain profitability over the coming quarters, with a slight impact from seasonal factors including the holy month of Ramadan and summer vacations, Al-Hammadi said.

Meanwhile, revenue from the Al Hammadi’s Al Nuzha branch is expected to account for 35 percent of total revenue once full operations are launched in the second half of 2017. Trial operations were launched at the hospital in March this year.

“After consolidating accounts of Al Hammadi Hospital Al Nuzha, profit margins will likely be pressured due to depreciation, murabaha and pre-operating costs, especially in the first quarter of operations,” Al Hammadi said.

Meanwhile, he noted that the Saudi government, which owed the hospital operator SAR 370 million by the end of Q1 2017, will start paying dues in the second half of the year.