Totally – already a beneficiary of coronavirus

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Totally – already a beneficiary of coronavirus
Master Investor Magazine

Master Investor Magazine 60

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The extra £5bn of NHS coronavirus funding declared yesterday will be a ‘totally’ green light for this company, which has ambitions to become one of the UK’s leading out of hospital healthcare service providers.

Yesterday’s Budget was one of aiming at the prosperity of the economy as opposed to the previous government’s austerity packages.

There were many measures that Rishi Sunak has introduced of which I totally approve.

And the spend on the NHS is one of those.

But then it will also be ‘totally’ well received by the £22m capitalised healthcare outsourcing group Totally Plc (LON:TLY).

The extra £5bn of NHS coronavirus funding declared yesterday will be a ‘totally’ green light for this company, which already has the aim of becoming a £100m valued group as soon as is sensible.

That growth in size will not only come from added NHS budget increases but also from strategic acquisitions within the healthcare sector.

Its target is to become one of the UK’s leading out of hospital healthcare service providers.

Through its outsourcing services the group seeks to deliver preventative and responsive care through its subsidiaries across multiple disciplines.

The market for outsourcing by the NHS within the highly fragmented healthcare sector is already worth some £20bn a year, and additional Budget spends will really help to boost that figure.

Its goal for the NHS is to help to improve people’s health, to reduce healthcare reliance, to handle re-admissions and emergency admissions.

The group’s ‘out of hospital’ services include those for care in the community, GP surgeries, patients’ homes, prisons and other public sector organisations, and places of work, as well as for mobile locations and urgent care solutions.

It operates through a number of different subsidiaries:

Premier Physical Healthcare and Optimum Physiotherapy – offers occupational physiotherapy to NHS, prisons and the police force as well as for private clients;

About Health – is a provider of community-based dermatology services and referral management services;

Vocare – is a leading UK urgent care provider through urgent care centres, GP out-of-hours services, integrated urgent care centres and the NHS 111 service;

Greenbrook Healthcare – delivers services for NHS patients in a growing number of GP Practices, Walk-in Centres, Urgent Care Centres and community services; and finally,

Totally Healthcare – which is a provider of insourcing to reduce hospital waiting lists across specialties such as endoscopy, ophthalmology, ear nose and throat (ENT), orthopaedics, urology and plastics with activities including diagnostics, day-case surgery and outpatient activity.

There are 182m shares in issue, with a number of institutions tucked into the equity already despite its as yet small size, including – Miton (15%), Cavendish Asset (8.23%), Threadneedle Asset (6.33%), Liontrust Investment (4.77%), Legal & General Investment (4.70%), Unicorn Asset (3.61%), and Killik & Co (2.42%).

Over the last couple of years the group, as it has been building up, has seen big jumps in its revenues from £42.5m in the year to end March 2018, to £78m in 2019, and estimates suggest that it could be around £120m in the year about to close.

There was a pre-tax profit of £2.1m in 2018, a £1.8m loss in 2019, while broker estimates suggest that £2.5m pre-tax profit is possible for this March year end, worth 0.8p per share in earnings.

Going forward this next year could easily see £141m of sales, and a staggering £4.5m pre-tax profit, worth 1.9p per share in earnings.

Budget boosts could help to better those figures.

The group’s shares are trading at 12p, ahead of a final trading update due early in April.

These shares look extremely appealing, and I now set an end-2020 target price of 18p.

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