Ramsey Health Care Ltd (ASX: RHC) is a global health care company mainly operating private hospitals. Ramsay has 480 facilities across 11 countries, which makes them one of the largest hospital health care companies globally. Ramsay’s main markets are Australia, the United Kingdom and Continental Europe. Its market capitalisation is around A$15 billion.
What are the key features of Ramsay’s report?
Revenue in HY20 increased by 22.5% to A$6.3 billion. Excluding the impact of the Capio acquisition in November 2018, revenue increased 4.8%. Core NPAT in HY20 rose by 3.4% (on a like-for-like basis) to A$273.6 million compared with HY19. Core EPS is A132.5 cents for HY20, which on a like-for-like basis represents an increase of 3.7%. The interim dividend is A65 cents, up 4.2% on the previous corresponding period.
What are the drivers of this result?
In Australia, Ramsay’s operations in HY20 delivered revenue growth of 3.9% and an overall EBITDAR growth of 2.4% on the previous corresponding period. Hospital admissions increased in HY20 but the overall activity growth in Australia remains subdued compared to the long-term average.
In Continental Europe, revenue in HY20 increased 44.3% and EBITDAR rose 38.0% (including the Capio acquisition) compared with HY19. Excluding the Capio acquisition, operations in Continental Europe delivered a solid result, with revenue up 2.4% and EBITDAR up 7.4% on the prior corresponding period. Activity for the first half was up against the prior corresponding periods in all areas. The integration of the Capio business into Ramsay’s Continental Europe operations is proceeding well and identified synergies are on track to be delivered.
In the United Kingdom, Ramsay’s operations performed well during the HY20, recording its best half performance in recent years. Revenues increased 8.7% on the previous half assisted by an increase in overall activity for the HY20 and strong performances particularly in private medical insurance and self-pay volumes. Ramsay UK’s EBITDAR performance rose 6.0% compared with HY19.
In Asia, Ramsay’s Asian joint venture (Ramsay Sime Darby) had an excellent half recording strong operating performances in both Malaysia and Indonesia and strong overall growth in admissions over the HY19.
What is the outlook for Ramsay?
Ramsay’s management reaffirm FY20 Core EPS growth on a like-for-like basis of 2% to 4%, which corresponds to negative Core EPS of -6% to -4% under the new lease accounting standard AASB16. This guidance is based on Core EBITDAR growth of 8% to 10%, which is unaffected by the new lease standard. This outlook reflects continued to be positive signs for Ramsay’s business in the UK and Europe while volume growth in Australia is expected to remain subdued.
In Australia, Ramsay is on track to complete in FY20 approximately A$168 million worth of hospital projects including 197 beds (144 net beds), three operating theatres and 85 consulting suites. In addition, two other major hospital projects will complete in FY21. This investment will underpin growth in Australia in coming years.
What is the market reaction?
The market reaction to Ramsay HY20 result is broadly in line with expectations. However, Ramsay’s share price is down 1.8% and is currently trading at A$73.46. However, this may not reflect Ramsay’s HY20 result as the Australian market is also down today. Ramsay trades on a forward P/E ratio in the mid-twenties and an annual dividend yield of around 2% (fully franked).
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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