Preliminary report on the health of private hospital system in Australia. This post pertains to the private health industry generally, not Ramsay specifically

Its not really all that helpful, but a few key points:

• Median EBITDA margin (p50) has fallen from about 10% to 5% in 5 years (see graphic)
• Private obstetric and mental health facilities under greatest pressure
• Private hospitals provide 70% of elective surgeries. Statements by Mark Butler distancing the government from success or failure of private enterprise ignore the inevitable link between public healthcare pressures
• Day surgery cases growing much faster than expected overnight admissions - look for private hospitals which provide innovative hybrid/virtual overnight stays to transition more patients out of hospital at night ($RHC is oversupplied in overnight beds I think)
• Expect greater pressure on insurers to contribute more to private hospitals
• Expect insurers to continue pushing for insurer-hospital partnerships to introduce US-style managed care products (generally considered a bad thing for patients). NIB tried and failed very recently to introduce such a scheme, but Im sure is still working on it

https://www.health.gov.au/sites/default/files/2024-11/private-hospital-financial-viability-health-check-summary.pdf?_cldee=n8hSwtkDelMYYKxEfmUeiW5O6xQgMy4jiQ859rA51v3XKmdIIm78sMXV17Lnws6o&recipientid=contact-9d18d4a35113ef119f8a00224892bcfb-dc9265614cc742f59e5e3c5826a21603&esid=8e5b28d2-0298-ef11-8a68-000d3acbacef

Wesfarmers is reportedly considering buying Ramsay Health Care, focusing on its Australian operations. (The Australian) 

I don't have access to the Australian unfortunately and not reported elsewhere currently that I can see.

• SALE OF RAMSAY SIME DARBY JOINT VENTURE
• REACHED AGREEMENT ON SALE OF ITS 50:50 JOINT VENTURE IN ASIA, RAMSAY SIME DARBY HEALTH CARE
• DEAL FOR MYR6,056M
• EXPECTS NET PROFIT AFTER TAX ON SALE OF ITS SHARE OF JOINT VENTURE WILL BE APPROXIMATELY A$630M
• DEPENDING ON TIMING OF COMPLETION, FY24 NET INTEREST COSTS EXPECTED AT LOWER END OF A$570-600M
• PROCEEDS TO RAMSAY EXPECTED TO BE ABOUT A$935M AND WILL BE USED TO PAY DOWN DRAWN DEBT OF FUNDING GROUP

The company has announced the sale of its Asian JV, for what looks like a good price. The proceeds will be used to pay down debt, which is also a good move. These operations only contribute a low single digit % of operating profits, so the divestment should be a positive for management to focus on the more important divisions.

How much egg is on the Ramsay board's collective faces after spurning KKR's approach @ $88? They looked after themselves at the expense of shareholders, and have now destroyed an enormous amount of value - the most I can think of in absolute terms on the ASX, especially for a large and established company like this.

The tomatoes may follow at this year's AGM :)

This is a company that I have been following for several years now and the price goes through cycles of growth as they expand overseas with private health care. The current situation as we "come out" of COVID is unclear but I see the potential for an upward cycle as people are able to return to using the medical system again. Will this trend return to previous highs or become a value trap? Only time will tell, but I am happy to take a small position to help follow the company closer.

An investor that I follow, Jun Bei Liu, had RHC as her recommendation focus for 2023 on Livewire, quoted below:

Jun Bei Liu: The best-performing stock for 2023 in my view is going to be Ramsay. We're a big believer in the premium asset that it holds. Its share price is very depressed because of its earnings, which COVID has impacted. It is one of the very few companies that is still yet to recover to pre-COVID levels. We know the waiting list is very long for public hospitals, and that generally translates straight into private hospital volumes. And it is already on the way up. This company will double its earnings and grow phenomenally just recovering from COVID. 

And then on top of that, there's a huge backlog they need to work through, which will take years. The company is trading almost at its asset value. Clearly, the private equity bid stuffed up the valuation somewhat, but now it's back below the pre-private equity bid value. And to me, this is a really good stock to hold, particularly in a slowing economic environment as its earnings are going to grow regardless of the economic outlook.

Looks like Ramsay is going to try and realise the value from the property portfolio.

RHC AU: Ramsay Health Care is believed to be planning a move to sell a selection of its hospitals to real estate landlords after suitor Kohlberg Kravis Roberts abandoned a $20bn buyout proposal earlier this year.

Again the market Baby is throwing a fit here - me thinks -for long term holders this might serve a decent entry point if you believe in the long term tailwinds for this business.

Surely the value of RHC has not dropped by 10% just because the clock has turned around 1 full circle - 24 hrs.

I am topping up here - RHC is a big ship- will come good in fullness of time.Ofcourse there might be more take over revised offers from other vultures.......hovering for a bargain

Reading through most broker research, most seem convinced that KKR comes back with a slightly altered alternative proposal but near the $88 per share offer.

Pure gamble, but at least you own a pretty decent business if it does fall through and it if does looking at 20% upside.

CITI - Raised to Buy PT $85

3rd quarter trading update - Ramsay remains well positioned to benefit from the growing backlog of elective surgery across each of its geographies and continues to invest in organic and inorganic initiatives to meet the forecast long-term growth in demand for healthcare services

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02515347-2A1370943?access_token=83ff96335c2d45a094df02a206a39ff4

"Agreement to acquire 100% of UK based mental healthcare provider Elysium Healthcare (Elysium) for a pre-IFRS 161 enterprise value of £775m (A$1.4bn) from private equity firm BC Partners

Transaction expected to deliver synergies of at least 5mill pounds p.a."

Interesting move into the mental health space - a growing sector with strong government backing and increasing research in diagnostics and treatments (in UK, Aust, France and Sweden in which they operate). They also mention leverage and extension into 'learning difficulties and neurological issues' space. I see this as a HUGE market, at both ends of the age spectrum with many government subsidies being increasingly encompassing of this area.

PE currently at 39.26, a bit on the high side.

Ramsay has announced that they did not receive the requisite shareholder approval for the acquisition of London-based Spire Healthcare (SPI-LSE). 

I must admit, I wasn't totally convinced on Ramsay's bid for Spire so I am happy to see it go through to the keeper. The fact that the market sold the business off on the news of the acquisition back in May shows I am not alone. 

I get that it would have transformed the UK business and diversified the payor sources, case mix, etc, but to wait 3 years before seeing any EPS accretion and for ROIC to exceed WACC it needed to be an absolute cracker.

This might be a bit unfair, but it seemed a bit like an acquisition for acquisitions' sake. RHC don't have huge growth options. True, in the UK there is a massive backlog in the NHS, which RHC (and others) will be helping the government get through over the next few years. And true, RHC do build new beds, clinics etc each year which adds to capacity. But remember, pre-covid guidance was only for EPS Growth of 2-4%. So growth is not nil.

Acquisitions have historically been a good source of EPS growth. But as the company has grown larger, acquisitions have needed to be bigger to move the needle. Spire would have cost ~$2bn and would have dragged on results for 3 years before actively contributing and providing a return. This is a decent time to wait and my view is that the acquisition wasn't good enough to be worth that wait so to me, that this acquisition hasn't gone through is a positive for the business. 

22-Dec-2020:  RHC enters new agreement with NHS England

RAMSAY HEALTH CARE ENTERS INTO NEW AGREEMENT WITH NHS ENGLAND

Ramsay Health Care (Ramsay) (ASX: RHC) announced today that it has signed a new volume based agreement with NHS England (NHS) which makes its services available to the NHS and its patients to meet the ongoing demands resulting from the COVID-19 pandemic. Ramsay will be able to continue providing private patient activity.

The new agreement will replace the existing cost recovery agreement with NHS which completes on 31 December 2020. The new agreement comes into effect on 1 January 2021 and will expire on 31 March 2021, unless terminated earlier on 6 weeks’ notice. The NHS may trigger a Peak Surge Period on 7 days’ notice should Ramsay’s capacity be required to enable the NHS to respond to COVID-19 cases. In these circumstances, the affected hospitals will be paid on a cost recovery basis.

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Also, yesterday (21-Dec-2020):  RHC and MPL sign new HPPA

RAMSAY HEALTH CARE AND MEDIBANK COMPLETE A NEW HOSPITAL PURCHASER PROVIDER AGREEMENT

Ramsay Health Care (Ramsay) (ASX: RHC) and Medibank (ASX: MPL) announced today the signing of a new three-year Hospital Purchaser Provider Agreement (HPPA) commencing from September 2020. The agreement will govern the arrangements under which Ramsay will provide approved treatment to Medibank customers and the payment terms for the approved treatment.

--- ends ---

[I hold RHC shares.]

24-Nov-2020:  2020 AGM - Chairman & Managing Director Address & Presention

Also, 11 days ago:  13-Nov-2020:  Ramsay Health Care First Quarter Trading Update

[I hold RHC shares.]

13-Nov-2020:  Ramsay Health Care First Quarter Trading Update

14-Oct-2020:  Ramsay Health Care Varies Agreement with NHS England

RAMSAY HEALTH CARE VARIES AGREEMENT WITH NHS ENGLAND EXTENDING IT TO 31 DECEMBER 2020

Ramsay Health Care (Ramsay) confirms that it has varied its agreement with the NHS England (NHS) which makes its facilities and services available to the NHS and its patients during the COVID-19 pandemic. The revised agreement allows for the return of some capacity for private patient activity and routine NHS elective activity.

The varied agreement is deemed to have come into effect from 1 July 2020 and will expire on 31 December 2020, unless it is terminated earlier (whether by service of one months’ notice by the NHS or by mutual agreement).

Under the varied agreement, Ramsay may request a limit on capacity available for NHS work for each premises (not below 75% generally, and not below 70% for certain premises in the London area or below 60% for certain premises in the commuter belt outside London) and will continue to receive cost recovery for its services, including operating costs, overheads, use of assets, rent and interest less a deduction for any private elective care provided. Ramsay will now have an opportunity to retain additional revenue on private patient activity over the course of the agreement.

During this de-escalation phase, the NHS may at any time, with 7 days’ notice, trigger a return to peak surge conditions under which Ramsay must ensure that 100% of its capacity is available to the NHS. Under these circumstances, Ramsay will be able to utilise unused capacity for private patients where appropriate.

Ramsay Managing Director and CEO Craig McNally said, “I am extremely proud of our UK team who have been assisting the NHS by performing thousands of operations on behalf of the public sector as it has focused and dealt with the impact of COVID-19. Under the revised agreement, Ramsay will continue this support including providing more complex care such as cancer care.”

--- ends ---  Click on link above to view the announcement.  Side note:  The smarter companies have either already structured their announcements to accomodate the ASX's new "always-on-top" "FOR PERSONAL USE ONLY" watermark up the left hand edge of every page of every announcement, or they have quickly modified their announcements to suit.  In this case, it's clearly not an issue due to the wide left margin that RHC have used.  In many other cases, particularly with smaller companies, they have been slower to react and many of their recent announcements have been rendered difficult to read.  

[I hold RHC shares.]

27-Aug-2020:  Financial Results for the year ended 30 June 2020   and   Investor Presentation FY2020 Results Briefing

plus   Preliminary Final Report (Appendix 4E)

RAMSAY HEALTH CARE DEMONSTRATES RESILIENCE IN TIME OF CRISIS AND A STRONG BALANCE SHEET TO SUPPORT ITS GROWTH STRATEGY INTO THE FUTURE

Financial Highlights

• Statutory net profit after tax down 47.9% to $284.0 million (down 40.0% on a like for like basis*)
• Core net profit after tax** (Core NPAT) down 43.0 % to $336.9 million (down 34.4% on a like for like basis*)
• Core earnings per share*** (Core EPS) down 44.5% to 155.9 cents (down 35.9% on a like for like basis*)
• Group****:
  • Revenue up 7.3% to $12.4 billion
  • EBITDAR***** down 7.0% to $2.0 billion
• Australia/Asia:
  • Australia Revenue down 2.2% to $5.1 billion
  • Australia EBITDAR***** down 23.2% to $781.3 million
  • Equity accounted share of Asia joint venture net profits down 18.2% to $15.9 million
• United Kingdom:
  • Revenue down 4.9% to £494.8 million
  • EBITDAR***** down 10.6% to £89.2 million
• Continental Europe****:
  • Revenue up 14.3% to €3.9 billion
  • EBITDAR***** up 8.5% to €641.1 million
• Final dividend has not been declared. Interim dividend 62.5 cents fully franked, up 4.2% on the previous corresponding period.

Overview

Ramsay Health Care today reported statutory net profit after tax, attributable to members of the parent (after adjusting for net non-core items after tax) of $284.0 million, a decrease of 47.9% on the previous corresponding period. On a like for like basis* this represented a decrease of 40.0% on the previous corresponding period.

Group Core Net Profit After Tax (Core NPAT) of $336.9 million, for the year ended 30 June 2020 decreased by 43.0% on the previous corresponding period. On a like for like basis* this represented a decrease of 34.4% on the previous corresponding period.

Notes:

1. (*) The New Lease Accounting Standard (AASB16) was adopted on 1 July 2019 and comparatives have not been restated, as permitted under the transitional provisions in the standard. In order to make meaningful comparison of the results, commentary has been provided on a like for like basis under the Old Lease Accounting Standard (AASB117) for FY20 and FY19.
2. (**) Before net non-core items. It is our intention to no longer separate our profit between core and non-core going forward
3. (***) Core EPS is derived from core net profit after CARES dividends
4. (****) Ramsay Santé has consolidated the earnings of Capio since the acquisition date on 7 November 2018. As the final square up of the revenue guarantee will not be performed until March 2021 and the grant income recognised for Ramsay Santé is based on the current estimate at hand at the time of issuing the Ramsay Group financial statements, these estimates may be updated and produce a different outcome for the 31 December 2020 Ramsay Group half year results. Similarly, the Ramsay Santé accounts will not be issued until October 2020 and these estimates may be updated and produce a different outcome to the management accounts.
5. (*****) EBITDAR is before non-core items.  EBITDAR = Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs.

Overview continued

Core NPAT delivered Core EPS of 155.9 cents for the year, a decrease of 44.5% on the previous corresponding period. On a like for like basis* this represented a decrease of 35.9% on the previous corresponding period.

As previously announced, the Company will not be paying a final dividend on ordinary shares for FY’20. The CARES dividend due for payment on 20 October 2020 will be paid.

Ramsay Health Care Managing Director Craig McNally said the business had been tracking well until the end of February 2020. “At our interim results we reaffirmed our FY’20 guidance of core EPS growth on a like for like basis of 2% to 4%. However, the extraordinary circumstances posed by the COVID-19 pandemic on the Company’s operations around the world resulted in us withdrawing guidance in March 2020 and had a significant impact on the full year result.

“With the onset of the pandemic in March 2020, the sustainability of the business and ensuring that we protected the wellbeing of our patients, staff and doctors was overwhelmingly our primary focus. This was one of the most remarkable periods in my 33 years with the Company and I am extremely proud of our global teams and how they responded to the crisis – delivering for each other and delivering for our patients, all the while strengthening our culture of ‘people caring for people’.”

He said due to the pandemic, elective surgery restrictions were imposed in most regions from March 2020 creating a significant level of uncertainty. “Ramsay led industry discussions with all levels of government in our major regions – Australia, UK and France – to make our facilities available to the respective national efforts, and in return, we were successful in securing agreements with government in the form of a viability guarantee.

“Ramsay’s hospitals around the globe continue to play a critical role in supporting governments, caring for patients and our communities and ensuring that our facilities are made available and remain fully staffed. I am pleased to report that no Ramsay employees were stood down because of the pandemic.

“This period has been filled with example after example of our hospitals, doctors and staff stepping up to care for thousands of COVID-19 patients and volunteering to work in aged care and public facilities.

“It has been an extremely challenging time for our staff and doctors as we have pivoted to support national efforts during this crisis. COVID-19 has impacted our financial result this year but, importantly, it has reinforced our role as a leading health care and hospital provider in our major regions.

“The period demonstrated what an incredible, and resilient, organisation Ramsay Health Care is. We have accomplished a lot over the period including an equity raising, and we are well positioned for the long term.”

[Click on first link above for the segment results, which I have not included here - mostly because they run to another 2 pages.]

Balance Sheet Strength and Liquidity

During the second half of 2020 Ramsay Health Care undertook an equity raising of $1.5 billion. This action was taken to strengthen Ramsay’s balance sheet and provide financial flexibility in order to navigate an uncertain operating environment.

Proceeds from the equity raising have been used to partially repay Ramsay Funding Group’s revolving debt facilities, which remain available for redraw.

As a result of the equity raising, the Group Consolidated Leverage Ratio6 has reduced from 3.1x at 30 June 2019 to 2.0x as at 30 June 2020.

The Group has available undrawn debt capacity and cash headroom of around A$3 billion (equivalent). The next scheduled debt maturity is not until October 2022.

The equity raising puts Ramsay’s balance sheet in a strong position to implement our strategic objectives, including continuing our brownfield developments and providing the ability to take advantage of other opportunities that may arise in the future.

Outlook

Mr McNally said FY’20 had been an extraordinary year and one that has highlighted the strength and depth of Ramsay Health Care.

“Our response during this pandemic has demonstrated what an incredible and sustainable organisation we are and one that is driven to do the right thing for our patients, staff and doctors.

“The agreements we achieved with governments around the world to play our part in national efforts, not only provided us with security in the short term, but also demonstrated the strength of the private sector.

“However, many uncertainties remain with respect to the ongoing impact of the pandemic. As a result, Ramsay is unable to provide financial guidance for FY’21.

“Notwithstanding the significant near-term uncertainties, over the longer term, strong industry fundamentals remain.

“In addition to the increased demand for healthcare generally created by ageing populations with increased incidence of chronic disease, there are also now longer public waiting lists in each of our markets. We expect to play an enhanced role in relieving pressure on public waiting lists into the future.

“Following our recent $1.5 billion equity raising, Ramsay is also committed to expanding our business both in Australia and overseas, in and out of hospital where there is a strategic fit and it meets our strict investment criteria. We have a strong balance sheet to support this growth strategy.”

--- click on links above for more ---

[I hold RHC shares.  RHC & CSL are my preferred long-term health care sector exposures.]

25-May-2020:  Ramsay Health Care Completes Share Purchase Plan

Was very oversubscribed - they received applications for almost $700m and the SPP was supposed to raise only $200m.  They have increased the SPP size to $300m, but most shareholders will now still only receive new shares equivalent to about 32% of the RHC shares they held on the record date (21-Apr-2020), subject to the $30K individual application cap - and assuming that they applied for enough shares to cover that 32%.  People who held a lot of shares but only applied for a small parcel in the SPP could possibly get most or all of what they applied for, however most applicants will get scaled back a lot (including me).  Still, not too bad - the shares were issued at $56 each and RHC is trading at over $68 today (over 21% higher).

15-May-2020:  Ramsay enters into NSW Binding Heads of Agreement

This binding agreement with the NSW Government comes after RHC had previously reached similar agreements with the Queensland and Victorian governments (which I've mentioned in other straws).

[Disclosure:  I hold RHC shares.  My total hip replacement surgery is now going ahead on Monday (18th May) so I might be a bit quiet next week.]

29 April 2020:  Ramsay finalises Agreement with State of Victoria

RAMSAY HEALTH CARE FINALISES VICTORIAN AGREEMENT

Ramsay Health Care (Ramsay) confirms that it has finalised the comprehensive agreement with the State of Victoria (the State) to make its facilities and services available during the COVID-19 pandemic (Agreement). The Agreement supersedes the Heads of Agreement under which the State and Ramsay have been operating since 1 April 2020.     
 
The term comprises an initial term beginning on 28 April 2020 until 20 business days after the State gives notice. That notice cannot be given before the later of 31 May 2020 and the lifting of temporary restrictions on category 3 and all non-urgent category 2 surgeries by the Commonwealth Government. In the event of an increase in COVID-19 cases, the State can ‘restart’ the operation of the Agreement for a further term if it needs to mobilise additional health resources and facilities.  
 
In return for its commitment to use reasonable endeavours to maintain full workforce capacity at its facilities, Ramsay will receive net recoverable costs for its services (being its recoverable costs less its revenue amounts, calculated on an accruals basis).  Recoverable costs includes direct operating costs, service costs, corporate overhead costs (to the extent related to the provision of the services), depreciation associated with pre-existing capital which is owned and amortisation of leases and preapproved capital expenditure. It excludes debt servicing and interest costs. 
 
Discussions with the State Governments of New South Wales, Queensland and Western Australia to finalise agreements for those States continue.

--- ends ---

Also:  Ramsay Share Purchase Plan Offer Open

Disclosure:  I hold RHC shares.

The following are some notes I put together to repond to a forum query by @Mozzie relating to RHC:

The biggest issue with RHC is that they have significant debt, with a gearing ratio that has ranged from 120% up to 160% for the past 5 years. This is because they have made some large acquisitions that have enabled them to expand into the UK and France. They have a very large presence in France now. The market is willing, for the most part, to accept that debt because:

a. The debt was used to purchase hospitals mostly which are very solid investments and are VERY unlikely to decline in value,

b. Ramsay is a large company with significant experience and an excellent track record of running hospitals, and they are sticking to their knitting for the most part (apart from expanding into medical centres and diagnostics, but they generally stick to running hospitals) so there is little execution risk;

c. The private hospitals that they run are a vital part of the health care system in Australia, the UK and France, as we have seen here in Australia with the Australian Federal Government guaranteeing their viability in the past couple of weeks in exchange for access to their equipment, facilities, staff and services to help combat the COVID-19 pandemic - the main point here being that these governments need a viable private hospital system to take the load off the public system, and therefore large private hospital operators will be provided with an operating environment in which they can continue to profitably operate - this is true in a crisis like this as well as in much more normal times; and

d. The assets purchased with the debt are producing sufficient cashflow to pay down the debt, so the debt will take care of itself over time. It is also locked in at low interest rates with repayments that are inline with projected cashflows and profits.

So that is the big negative - they have a LOT of debt.

Positives:

1. RHC has reported increased NPAT for the past 10 years in a row (except for a small drop in 2018);

2. RHC has reported increased EPS every year for at least the past 10 years;

3. RHC's ROE has been double digits for the past 10 years and has been trending up, with an ROE of 14% back in 2010 and an ROE of 24.5% in 2019, so their profitability is good and higher than many of their peers;

4. RHC have increased their dividends every year for the past 20 years - you can check that here: https://www.sharedividends.com.au/rhc-dividend-history/ - just click on that link and then scroll down to the graph;

5. RHC's Book Value has increased every year for at least the past 10 years - so the business is worth more every year;

6. Commsec shows that RHC's ROC (return on capital) has ranged between 9% to 13% over the past 10 years; and

7. RHC is considered safe because they are one of the larger Health Care sector companies listed on the ASX and they are at the safer end of the Health Care spectrum, operating vital facilities rather than trying to develop new technology, new drugs or new treatments.

I hold RHC. I value them as being worth around $75, I have an $80 PT, and I'm happy to buy them (or top up my holding) at around $60.  There is a quality premium in the share price, just as there is with CSL.  You just have to accept that I think.  CSL looked expensive at $200 this time last year and they're now over $300/share.  RHC are no CSL, but they're not a world away either.  RHC are very unlikely to have that sort of upside.  They are more of a slower growth company that just keeps on keeping on, for those who are happy to have a steady achiever in their portfolio.  RHC is one of those companies that you could buy at almost any time and at almost any price and then look back in 5 years and be very happy with that investment and the total shareholder return it will have provided for you.  They are unlikely to shoot the lights out, but they make a very good super fund holding.  They can also provide good shorter term returns when bought on dips such as we have seen lately.  They're trading at under $60 again now, and they'll be back above $70 again soon enough, and heading back towards $80.  We all need hospitals, particularly right now.

14-Mar-2019:  Ramsay Health Care (RHC) held their UK Investor Day yesterday (13-Mar-19, i.e. overnight - Australian time) and their company presentation prepared for those who attended can be viewed here.

Disclosure:  I hold RHC shares.  They are a very good SMSF stock, as they have raised their dividends every single year for the past 18 years straight, while providing decent capital growth as well.  They are one of only two companies in the All Ords index to have achieved this.  The other one is Soul Patts (SOL) - Washington H Soul Pattinson.  SOL have raised their ordinary dividends every year for the past 18 years straight and paid some special dividends as well in some of the earlier years.  Very different companies, but both excellent inclusions in any super portfolio (if bought at a reasonable price - SOL was far better buying 12 months ago - below $20, especially around the $16 level).  RHC is already in the ASX100 index, and SOL are about to enter it (next week).

12-Sep-19:  I wrote that back in March - so 6 months ago.  SOL & RHC are both in the ASX100 and both are good SMSF stocks for steady growth, including steady dividend growth.  I hold them both, in different portfolios.

27-Feb-2020:  Financial Results Half Year ended 31 December 2019

Half Year Financial Results Presentation

Half Year Financial Report 31 December 2019

Calendar of Key Dates 2020

RAMSAY HEALTH CARE PERFORMANCE IN LINE WITH EXPECTATIONS. REAFFIRMS FULL YEAR GUIDANCE

Financial Highlights

• Core net profit after tax(1) (Core NPAT) of $273.6 million (up 3.4% on a like for like basis*)
• Core earnings per share(2) (Core EPS) of 132.5 cents (up 3.7% on a like for like basis*)
• Group:
  • Revenue up 22.5% to $6.3 billion (excl Capio revenue up 4.8%)
  • EBITDAR up 17.4% to $1.1 billion (excl Capio EBITDAR up 5.4%)
• Australia/Asia:
  • Australia Revenue up 3.9% to $2.7 billion
  • Australia EBITDAR up 2.4% to $530 million
  • Equity accounted share of Asia joint venture net profits up 13.6% to $12.5 million
• United Kingdom:
  • Revenue up 8.7% to £267.6 million
  • EBITDAR up 6.0% to £47.7 million
• Continental Europe**
  • Revenue up 44.3% to €1.9 billion (excl Capio revenue up 2.4%)
  • EBITDAR up 38.0% to €319.1 million (excl Capio EBITDAR up 7.4%)
• Interim dividend 62.5 cents fully franked, up 4.2% on the previous corresponding period

* The New Lease Accounting Standard (AASB16) was adopted on 1 July 2019 and comparatives have not been restated, as permitted under the transitional provisions in the standard. In order to make meaningful comparison of the results, commentary has been provided on a like for like basis under the Old Lease Accounting Standard (AASB117) for 1H FY20 and 1H FY19.

**Ramsay Santé has consolidated the earnings of Capio since the acquisition date on 7 November 2018.

(1) Before net non-core items

(2) Core EPS is derived from core net profit after CARES dividends  

Overview

Ramsay Health Care today reported a Group Core Net Profit After Tax (Core NPAT) of $273.6 million, for the six months to 31 December 2019. On a like for like basis*,  this was an increase of 3.4% on the previous corresponding period.

Core EPS is 132.5 cents for the half year, which on a like for like basis* is an increase of 3.7% or 145.8 cents.

The Company’s statutory net profit after tax, attributable to members of the parent (after adjusting for net noncore items after tax) is $258.4 million.

Directors are pleased to announce a fully-franked interim dividend of 62.5 cents, up 4.2% on the previous corresponding period.  The dividend Record Date is 6 March 2020 with payment on 27 March 2020.

Ramsay Health Care Managing Director Craig McNally said overall, the business performed solidly in the 1H.  

“Our businesses in the UK, Continental Europe and Asia performed well during the period but this was partially offset by more challenging conditions in Australia,” Mr McNally said.

“During the 1H, we continued to invest in infrastructure and research to position the business for the future including, digitalizing and integrating our IT systems."  

“At the same time, we are focused on opportunities outside our core hospital business that will further our position as a global integrated healthcare service provider with a more convenient and accessible healthcare offering to better meet the expectations of our clinicians and our patients.” 

--- continues --- click on link above for more

Disclosure:  I hold RHC shares.  They don't shoot the lights out, but they keep growing the business every year, and increasing their dividend every year.  In fact, RHC and SOL (who I also hold) have increased their ordinary dividends every single year since the year 2000, so this will be the twentieth consecutive year of dividend growth for both companies.  For the first 10 years of that 20-year period (from 2000 to 2010) Soul Patts (SOL) also paid additional special dividends, which makes their dividend chart look quite lumpy during that decade, but the main point is that both companies have increased their ordinary dividends every single year since 2000.  Additionally, SOL's dividends have ALL been 100% franked during that period and RHC's div's have been 100% franked since 2003 (past 17 years), despite having a large part of their business based outside of Australia.  Both RHC and SOL are excellent set-and-forget superannuation fund stocks, and are also suitable for investors seeking a regular and growing income stream via dividends.

An uncharacteristic profit downgrade from RHC. There is plenty of fish for the bears.

This is an interesting article

https://www.livewiremarkets.com/wires/ramsay-the-world-has-changed

I like the long-term thematic. I cannot see any short-term catalysts for this company to rerate, and neither can the market. FY18 PE 20.

Alternatives in healthcare: Healthscope PE 25, Medibank PE 18, Primary Healthcare PE 21, Sonic Healthcare PE 22.

As a doctor I am very confident that healthcare will become increasingly privatised and serviced by corporations. RHC is out of favour today, but the market is being short-sighted. Analysts are not looking beyond FY19/20. Ramsey Healthcare is a high quality long-term buy and hold. Management has an excellent history with a long-term mindset. By operating in Australia, UK, France, RHC has economies of scale, with associated pricing power and cost cutting advantages. The aging demographic is obvious, but an even more important trend is the inevitable government reliance on private healthcare. Governments and private health insurance can try to squeeze margins, but this will be a short-term problem. Anything which tightens profit margins, will simply kill smaller hospital operators and widen RHC's moat. It will always be in the government's best interest to address the affordability issues of private health insurance and reduce the increasing reliance on public hospital system. PHI uptake issues will not affect elderly people, when the waiting lists blow out.