Ramsay Health Care Limited (ASX: RHC) announced this morning that it is downgrading its FY18 guidance and making $125 million worth of write-downs and onerous lease provisions.
Ramsay is Australia’s biggest private hospital business, it operates large operations in France, Australia and the UK.
Write-downs
Ramsay (RHC) said it has recently reviewed the value of its UK assets. It concluded that it will make a £70 million, net of tax, charge to its FY18 result which includes onerous lease provisions and asset write-downs related to UK hospital sites.
Ramsay said the write-down won’t affect its debt facilities or its dividend payments because it will not included in Ramsay’s core profit calculation for FY18.
Ramsay’s Managing Director, Craig McNally, said: “While the funding boost for the NHS announced this week by the UK Prime Minister is a positive step, we do not anticipate immediate benefits for us and expect operating conditions in the UK to remain challenging in the medium term.”
Profit guidance downgrade
Ramsay said that not only is its UK operations suffering from a “significant” downturn in NHS volumes, it is also experiencing slower growth rates of procedural work and inpatient admissions in Australia. It is also suffering from a delay in rolling out the Ramsay Pharmacy franchise network.
According to Ramsay management, the May results were disappointing and there is no improvement expected in June. Therefore, Ramsay told investors that its FY18 core profit per share growth is expected to be 7% compared to previous guidance of 8% to 10%.
“We continue to invest strategically in brownfield expansions which will contribute to long term growth for the business,” Mr McNally commented. “At the same time, we are implementing a range of cost management and procurement strategies which will ensure we remain a leader in cost-effective healthcare delivery in all the markets we operate.”
Investors may have seen this coming with the Ramsay share price down around 14% over the past year, according to Google Finance.
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