Nightingale Health H2’22 morning result: Figures weak throughout, targets provided a bright spot
Translation: Original comment published in Finnish on 9/29/2022 at 10:05 am.
In light of the figures, Nightingale’s financial statements were weak and short-term growth risks have realized. On the other hand the objectives for the new fiscal year included, for the first time, integration directly into existing blood sample flows in the public sector. Achieving this goal would be a significant step for the company on its way to a large-scale business. However, this does not yet support our short-term estimates of strong growth so there is initially a clear downward pressure in our estimates. We feel, however, that the market has for a long time priced the company's growth prospects well below our pre-report estimates.
Operating figures were clearly lower than our expectations throughout
Nightingale’s H2 revenue deteriorated to EUR 0.9 million (H2’21: 1.1 MEUR), while our estimates indicated strong growth based on a stronger order book (6/30/22: 3.8 MEUR). The order book itself grew to about 1.5-fold from the comparison period, so the order book was not translated into revenue growth as we expected. The commercial partnerships launched by the company (Mitsui/Welltus (Japan) and Terveystalo), or the Livit service provided directly to consumers do not, in our opinion, yet generate significant revenue. The Physitrack partnership (UK/Germany/Nordic countries), published in June, and the expansion to genetics through the Negen acquisition in early 2022 were in practice not yet visible in the figures either.
Profitability was weaker than we expected on all lines, which was due not only to lower revenue but also higher costs than we estimated. The particular weakness of the pre-tax profit line was explained by the write-down on the Weavr investment, which was caused by a significant deterioration in the financial situation of growth companies. However, the company's net debt was close to our estimate (6/30/22: 92 MEUR, Inderes: 91 MEUR). Nightingale announced int the report that it will move to IFRS reporting, and IFRS accordant figures are expected to be released on October 27.
Business growth is not on the path we expect: significant downward pressure in estimates, but targets include a bright spot
We feel the actual figures were worrisome for Nightingale’s short-term growth outlook. During the fiscal year 2022-2023, the company aims to reach a significant commercial contract in the public healthcare sector, win B2B commercial contract(s) with more than 50,000 blood samples, and win contract(s) in medical research with more than 175,000 blood samples. The company announced it will release financial targets for the consumer business later when there is more data available for the forecast. The targets did not support our short-term growth estimates, so we feel there is clear downward pressure in our estimates.
In terms of Nightingale’s growth story, short-term growth is secondary even if a credible path to strong growth is important for the story to progress. From this point of view, especially the contract in the public healthcare sector was a bright spot in the targets as it aims at utilizing existing blood sample flows. The strong growth we have estimated for Nightingale has in particular been based on integration of the company's service into existing laboratory sample flows, as well as the monetization of a large number of users served this way. Achieving this objective would thus support the company's ability to strengthen its growth clearly from the current level, although this would hardly be reflected in the figures for the next few years. The small 200,000 sample analysis agreement with the Estonian biobank signed at the beginning of 2021, is, to our understanding, the only partnership so far with this model. Nightingale’s other major partnership agreements (Terveystalo, Mitsui/Welltus and Physitrack) have relied more directly on commercial use and we believe that they have not yet shown signs of progress toward significant business activity. However, a more accurate assessment of the likelihood of a public sector contract and digesting Nightingale's growth outlook requires a more detailed analysis, which we will return to after today in the form of a company report.
Nightingale Health
Nightingale Health operates in medical technology. The company specializes in the development of medical devices. The product portfolio is broad and includes platforms and services in blood tests that are used for disease prevention purposes. In addition to the main business, service and associated ancillary services are also offered. The business is run globally with the largest presence in Europe.
Read more on company pageKey Estimate Figures2022-02-25
2021 | 22e | 23e | |
---|---|---|---|
Revenue | 2.1 | 3.0 | 8.9 |
growth-% | 31.88 % | 43.68 % | 197.16 % |
EBIT (adj.) | -5.3 | -10.2 | -13.7 |
EBIT-% (adj.) | -253.63 % | -339.82 % | -154.69 % |
EPS (adj.) | -0.13 | -0.18 | -0.23 |
Dividend | 0.00 | 0.00 | 0.00 |
Dividend % | |||
P/E (adj.) | - | - | - |
EV/EBITDA | - | - | - |