A good or a bad year for the Top 100?
This week we publish this year’s Top 100, a list of the top 100 health care groups by 2022 revenue in EMEA. Was it a good or a bad year for them?
On the face of it, it would appear it was a good year. The total revenue of all 100 groups is 7% higher than in 2021. Only 11 out of the 100 groups saw decreases in revenue, and five of those were labs groups whose revenue was inevitably going to fall because of Covid testing winding down.
But when you take into account inflation, which was around 10% or higher in most of EMEA throughout the year, the picture becomes somewhat different. Only 36 of the 100 companies saw revenue increase by more than 10%. Most health care services groups saw a real-term (inflation-adjusted) cut to their revenues.
And, even more pertinently, most companies were not able to pass on steep cost increases (which in some cases were above the overall level of inflation) to payors, at least not immediately. So profit margins will have been, in most cases, squeezed.
It’s therefore no surprise that the share prices of the big listed groups in the list almost all fell during the year – and some by a lot! Inflation and squeezed margins are not the only reason for this; high interest rates also played their part in reducing the value of equities. But the perceived future profitability – or lack thereof – of the companies is likely the main factor.
Part of the issue has, of course, been the difficulty of growing through M&A as the debt tap was turned off throughout much of the period. And, taking a more long-term view, the workforce shortage remains a major bottleneck on the ability of health care companies to grow. Were it not for these issues, revenue growth would likely have been a lot higher across the board.
But profit margins matter as well, especially in an environment of increasing costs. Perhaps we should also do a table of the top 100 health care groups by profit – and see how different the list is!
We would welcome your thoughts on this story. Email your views to Martin De Benito Gellner or call 0207 183 3779.
