Saudi Arabia’s Dallah Healthcare Company reported a sharp drop in fourth quarter (Q4) 2018 net profit, pushing its stock price downwards on Tuesday.

Dallah recorded a Q4 2018 net profit of 33 million Saudi riyals ($8.8 million), compared to a net profit of 63 million riyals in Q4 2017, translating into a 49 percent year-on-year drop.

The company’s shares were trading 1.92 percent lower on Tuesday, at 66.5 riyals by 12:45 GST but have gained 18.15 percent since the start of the year.

Asim Bukhtiar, head of capital markets research at Saudi Fransi Capital, said in a note published on Tuesday that “Dallah announced (a) disappointing end to a challenging 2018.”

Saudi Fransi Capital had estimated the company would report a 52 million riyals net profit for Q4 2018.

“While revenues were inline, preliminary results suggest dramatic escalation in personnel costs, severely compressing margins,” Bukhtiar added.

Revenues amounted to 318 million riyals in Q4 2018, meeting Saudi Fransi Capital’s estimates, but lower than the 326 million riyals recorded in Q4 2017.

Saudi Fransi Capital’s Bukhtiar added that he believes most of the challenges that the company faced in 2018 will persist through the next four quarters, unless the Ministry of Health’s privatisation plan “suddenly accelerates”.

The Ministry of Health in Saudi Arabia is taking steps to privatize government hospitals in Saudi Arabia. (Read more here).

“Cash DPS (dividend per share) for F2018 (full year 2018) was cut to SAR (Saudi riyals) 1.50, from SAR 2.50 in prior year, however planned capital increase to SAR 750 mln (million) from SAR 590 mln, will supplement with bonus shares,” he added.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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