Saudi German Health’s Q1 2026 results hurt by temporary factors: CEO

Nezar Bahabri, CEO of Saudi German Health, said revenue is set to grow steadily in Q2 2026.

Nezar Bahabri, CEO of Middle East Healthcare Co. (Saudi German Health), said that financial results for Q1 2026 were largely affected by non-operational and temporary factors and not by a decline in core activity or demand strength.

He told Argaam that the decline in Q1 net profit was due to non-recurring factors, mainly from SAR 114 million one-off profit from the sale of a real estate asset in the same period last year, against SAR 7 million loss incurred by an associate company in the current period, as well as higher expansion costs and investments in infrastructure and medical staff.

The company’s core operating performance remains strong, backed by a roughly 10% increase in specialized medical procedures and the recruitment of more than 400 Saudi doctors during the past year, he added.

Revenues rose by 4% year-on-year (YoY), driven by an increase in the number of patients and a rise in specialized and complex procedures, Bahabri said.

He stressed that performance evaluation should be based on the quality of growth, not just on profit size, given the company’s current investment and expansion phase.

Furthermore, the margin pressure during the first quarter was due to a mix of operational and regulatory factors, most notably higher recruiting costs for specialized medical talent, increased depreciation from expansions, and a shift in the service mix toward more complex cases with higher initial costs.

The CEO pointed out that adapting to regulatory systems and digital transformation, including the National Health Insurance System (NPHIES), involved short-term costs but supported improved efficiency and governance in the future, while maintaining an EBITDA margin of 18.1% annually.

Elsewhere, the number of inpatients rose by more than 7%, while outpatient visits increased by more than 1%, despite the seasonality of Ramadan and Eid Al-Fitr during the first quarter.

Bahabri stated that growth was now being driven by complex cases and specialized fields, which positively impacted average revenue per patient.

“Our growth is no longer based solely on the number of visits, but on the value and complexity of medical services, which is a deliberate strategic direction that enhances profitability over the medium and long term.”

Bahabri said the Co-operative Health Insurance Law represents a national transformation aimed at increasing transparency, improving claims efficiency, and reducing long-term operational errors. He added that the move is not viewed as a permanent drain on profitability, but rather as a short-term regulatory and operational investment with sustainable positive returns.

The new specialized services are the main growth driver, as the company shifts from a traditional service model to one based on advanced, high-value care, said the CEO. He expected a gradual improvement in revenues from these services in 2026.

Bahabri expects some centers to reach break-even within 12 to 18 months, as operations mature and occupancy rates stabilize, with a clearer positive impact on margins expected in 2027.

Regarding the associate company, Bahabri noted that current losses are normal in the early stages due to operating costs and capability building, expecting gradual improvement in its performance during the second half of 2026, reaching break-even within 18 to 24 months, and contributing positively as operations stabilize thereafter.

Moreover, revenues are set to grow in Q2 2026 at a steady pace, with a gradual improvement in operating efficiency compared to the first quarter, despite continued relative margin pressure at a slower pace, as the effects of expansions and regulatory costs are absorbed, the CEO said.

He believes the second half of the year will witness a gradual shift toward improved profitability, supported by operational stability and greater efficiency.

“We are undergoing a strategic transformation from quantitative expansion to a focus on efficiency and building advanced medical capabilities, by maximizing the utilization of existing assets, improving the quality of care, and increasing the complexity of medical cases to enhance long-term value.”

The current growth is sustainable, as it is based on strong operational and regulatory foundations, including developing medical capabilities, improving operational efficiency and investing in digital transformation. This is in addition to increasing localization rates, with Saudi doctors representing about 32% of the total workforce.

The company’s strategy aligns with the objectives of Saudi Vision 2030, which aims to enhance the role of the private healthcare sector and improve service quality, he added.

Bahabri stated that 2026 plans focus on qualitative rather than quantitative expansion, including the construction of a new hospital in Jeddah with a capacity of 194 beds and 22 outpatient clinics, the launch of centers of excellence in cardiology, oncology, and neurology, and the expansion of the advanced tertiary care model across the hospital network.

According to Argaam data, Saudi German Health’s profit dropped to SAR 25.7 million in Q1 2026 from SAR 160.1 million a year ago.