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(Sharecast News) - Analysts at Canaccord Genuity slashed their target price on healthcare service provider Totally from 70.0p to 40.0p on Thursday, stating cost pressures had impacted margins.
Canaccord Genuity said Totally's year-end trading update showed it had continued to see strong demand for its services, with revenues expected to be broadly in line with expectations.
The Canadian bank noted that Totally's Pioneer unit has "performed strongly", with revenues from elective care services doubling year-to-date and the recently secured national NHS 111 support contract going live and beginning to contribute to organic growth.
However, Canaccord stated that Totally was also facing "similar challenges" to the NHS - including cost inflation, service and schedule pressure from strike action, and a reliance on agency staff to manage clinical workforce shortages in urgent care. In addition, delays to tender processes and ongoing legal discussions regarding certain contracts were said to be "putting near-term pressure on margins".
As a result, Totally issued guidance for roughly £6.3m in underlying earnings in 2023, while net cash was expected to be £5.5m on 31 March, and Canaccord updated its estimates to reflect the firm's update, which results in a reduction of 31% and 22% to adjusted earnings per share for 2023 and 2024.
"Whilst this result highlights near-term challenges which need to be overcome, we continue to believe that Totally is well-placed to support the NHS with high-quality healthcare services across both urgent and elective care over the medium-to-long term," said Canaccord, which reiterated its 'buy' rating on the stock.
Reporting by Iain Gilbert at Sharecast.com
